Debt collectors may be coming for your $1,400 stimulus check.
As pointed out by CNN, the third round of relief payments cannot be garnished to pay outstanding government debts, such as back taxes or federal student loans; however, a loophole in the $1.9 trillion American Rescue Plan allows garnishments for a number of private debts, including unpaid credit card bills or medical costs. The news may come as a shock to some Americans, as previous stimulus payments were fully protected through legislation; but because Joe Biden’s relief package was passed through the budget reconciliation process, lawmakers were unable to include those protections in the latest round of payments. This means those checks may be taken by debt collection agencies who are looking to satisfy an unpaid judgment.
The American Bankers Association are now calling on politicians to fix that loophole and ensure the relief checks go to every qualifying American rather than private companies.
“It is simple to code the payments as exempt, and we believe it is imperative that Congress ensure that these next stimulus payments are treated as ‘benefits’ subject to the federal exemption from garnishment,” the ABA wrote in a letter last week. “Otherwise, the families that most need this money—those struggling with debt and whose entire bank accounts may be frozen by garnishment orders—will not be able to access their funds.”
Sen. Ron Wyden (D-Ore.) says he plans to introduce a bill that would protect stimulus payments from private debt collectors sometime next week. Wyden, who is also the Senate Finance Committee Chairman, said he hopes the proposal will receive bipartisan support.
”While Democrats intend to protect the third payment from private debt collectors, Senate rules did not allow us to include that protection in the American Rescue Plan,” Wyden said in a statement to The Hill. “I will be introducing standalone legislation to ensure families receive their much-needed relief payments … Last year, Democrats and Republicans joined together to shield previous relief payments, and I would hope that Senate Republicans again support ensuring families receive the $1,400 they need to pay rent and buy groceries.”
Some Americans have already received their $1,400 payments through direct deposit, while others are still waiting for paper checks or deposits into their accounts. Eligible tax-payers must earn no more than $80,000 of adjusted gross income, while payments for couples are capped at $160,000.