United Church of Christ – Wider Church Ministries
Humanitarian Development Team
Coronavirus (COVID-19) Daily Briefing
Barbara T. Baylor, MPH – Temporary Health Liaison
Fact: Loophole may allow creditors to seize your stimulus check!
This week, the $1,200 stimulus check, also known as the Economic Impact Payment, began to appear in Americans’ bank accounts. These payments are made possible by the CARES Act that Congress approved in response to the COVID-19 crisis.
Unfortunately, due to a legal loophole by the Treasury Department, the money may not make it to some who need it to pay bills, buy food, or just survive amid mass unemployment and widespread suffering. The department has given banks the power to seize the $1,200 payment and use it to pay off outstanding debt such as delinquent loans, late fees and overdraft fees.
In addition, CARES Act payments are not exempt from private debt collection. Because payments are defined as tax credits and not federal benefits like Social Security, SSI or veterans benefits they are subject to “garnishment,” meaning that a debt collector who wins a judgment in court can seize anything of value held by the debtor.
Congress did give Treasury the authority under Section 2201(h) of the CARES Act to write rules exempting the payments from private debt collectors. Sens. Sherrod Brown (D-OH), Ron Wyden (D-OR), and Elizabeth Warren (D-MA) wrote to Treasury Secretary Steven Mnuchin on April 3 urging him to write rules to that effect.
Brown later teamed up with Republican Josh Hawley (R-MO) to ask for the same thing.
Notably, 25 state attorneys general (23 Democrats and two Republicans) also asked for Treasury to issue regulations to protect CARES Act payments from garnishment. Numerous consumer advocates have sought this clarification as well.
The Treasury Department has not yet acted to rewrite the rules.
Action Opportunity: Please call your legislative representatives to speak up about this egregious rule. Call your state’s attorney general and ask them to please send a letter to Treasury Secretary Steve Mnuchin urging him to write rules that will exempt the stimulus payments from private debt collectors.
In the meantime, you MAY be able to protect your COVID-19 check from garnishment. See Debt collectors are going after millions of stimulus checks — 5 ways to stop them.
Now that the stimulus checks are on the way, a number of myths have surfaced:
Myth: Stimulus payments must be paid back.
Fact: If all the information in your tax return is accurate, you will not have to repay the check next spring when tax season rolls around.
Myth: Stimulus checks are taxable.
Fact: Checks are organized as refundable tax credits and are not taxable income.
Myth: Stimulus checks cut into your tax refund for 2020.
Fact: According to Money.com, the IRS stimulus check is in addition to what you’d already get. It’s not a portion of your 2020 tax refund that you’re receiving early. The phrase “advance on future tax refunds” doesn’t mean you’ll receive less money next tax season. “Advance” refers to a special tax credit that will appear on the tax return you file in 2021 for the 2020 tax year.
Myth: You can’t get a stimulus check if you don’t have direct deposit.
Fact: Business Insider reported that people who don’t use a direct deposit will receive paper checks in the mail by September. However, if you have not provided direct deposit details to the IRS you can provide that information. Go to IRS Economic Impact Payments landing page.
Myth: Benefits recipients are ineligible to receive stimulus checks.
Fact: False. People who have a Social Security number and meet the eligibility requirements will receive a stimulus check. This includes people with benefits from Social Security retirement, disability (SSDI) and Railroad Retirement.
AARP: Stimulus Checks: Who is Eligible and How Much Will They Be?
Your coronavirus check is coming. Your bank can grab it.
Debt collectors are going after millions of stimulus checks — 5 ways to stop them