Americans are beginning to receive coronavirus pandemic relief payments from the U.S. government this week, but some payments may be seized by banks before they even get a chance to spend them. While the money is meant to protect Americans from the unexpected economic fallout of the COVID-19 outbreak, it is not protected from private debt collection, according to a report by Forbes. That means that lenders could disappear into outstanding loans.
The government is disbursing billions of dollars to the American people this month as a part of the CARES Act, written to mitigate the economic impact of the coronavirus pandemic. The $1,200 stimulus check many Americans are getting is not taxed, and cannot even have back taxes deducted from it by the IRS. However, private lenders are another matter. Banks and creditors have the right to take outstanding loan payments straight from peoples' stimulus checks.
Some big banks have reportedly not yet ruled out collecting debts from coronavirus relief payments, including Bank of America, Citibank and U.S. Bank. The Treasury Department also seems to be alright with the companies doing so, according to a shocking leak from The American Prospect Magazine.
The outlet obtained a leaked audio recording taken in a meeting between Treasury Department officials and bank executives. In it, the chief disbursing officer of the Fiscal Service Ronda Kent spoke to representatives of several banks, saying: "You will want to know for your bank what your bank has decided to do... there's nothing in the law that precludes [whether these payments could be subject to collection from the bank to which the money is deposited, if the payee owes an outstanding loan or other payments to the bank]."
Kent advised compliance officers to consult with their legal offices about the policy on these stimulus checks before collecting. So far, several of the biggest banks in the nation have not made it clear whether they intend to collect debts out these emergency checks, nor have some smaller banks or credit unions around the country. However, a JPMorgan Chase spokesperson told The American Prospect that the company would be returning any money collected to the government so that the recipient would get the full benefit of the stimulus check. "The U.S. Treasury can then determine the address to mail the full stimulus amount and ensure the former customer gets the full benefit," they said.0comments
A Wells Fargo spokesperson said that the company would not be using the stimulus checks to pay down any negative balances. They said: "To do our part to provide our customers access to the stimulus payment funds, Wells Fargo is pausing for 30 days the collection of negative balances existing at the time when stimulus payments are deposited."