Many Americans waiting for the third round of incentive checks may instead find their payments going to debt collection agencies.
The new $ 1.9 trillion “American Rescue Plan” Signed into law on Thursday, does not prevent stimulus payments from being garnished. While lawmakers tried to include a provision protecting the payments, the way the legislation was passed through budget reconciliation did not allow it.
“It would be horrible if money that Congress allowed to feed families, care for people who are struggling … are seized by debt collectors to pay old debts,” said Lauren Saunders, deputy director of National Consumer Law. Center, at Yahoo Money. . “That’s why we’re not performing this extraordinary relief.”
According to the White House, about 158.5 million households are expected to receive payment under the new stimulus deal.
The first $ 1,200 incentive checks in the spring were not protected from private seizure or child support, while the second $ 600 payments were fully protected. Some states have issued their own seizure protections for the first round.
Any private debt collection agency that has a verdict against you can garnish the final round of payments. Credit card and medical debts are the two most likely collections by debtors, according to Saunders. Incentive checks can also be garnished by debt collection agencies for unpaid private student loans in some circumstances.
However, the payments cannot be garnished by the Internal Revenue Service for back taxes or child support compensation.
Sen. Ron Wyden (D-OR) is expected to introduce standalone legislation to protect the third round of checks from seizure, but it could be too late for some as many of the payments will be made to Americans’ bank accounts in the coming days. will hit. . If the payments are sent before Congress passes any legislation, they will not be encrypted to warn banks to automatically protect them.
The seizure varies from state to state, but usually the collection agency hands the seizure to the bank, after which the bank blocks the account and notifies the consumer. The consumer has a short time to go to court to contest the order or to apply for an exemption. Unless the court lifts the attachment, the bank will eventually hand the money over to the collector.
Consumers may have the option to withdraw their payment before the bank has been seized. But debt collection agencies may have a good idea when the payment can be deposited, Saunders said.
“If they think they are at risk of seizure,” she said of consumers, “they should keep an eye on their account and withdraw the money immediately.”
Aarthi Swaminathan contributed to the reporting.