First Round of Federal Stimulus Payments Released Friday

A key part of the Coronavirus Relief and Economic Stimulus Act (CARES), millions of Americans will be receiving up to $1,200 to help pay for groceries, utilities and other bills.

While the CARES Act states that the federal government, during the coronavirus pandemic, will not garnish payments for overdue federal debts such as back taxes or unpaid student loans, it is unclear what happens to other kinds of debts, including those that can be garnished under state law or setoff against delinquent consumer loans or from being used to offset negative balances in share accounts.

Garnishment Under State Law:
Because the stimulus checks are defined as a tax rebate, credit or refund, they are not considered a government benefit and therefore are subject to garnishment under state law. Whereas, accounts containing Federal benefit payments such as Social Security payments and certain pension benefits are protected under Federal law from being garnished. For more details read CUNA's Removing Barriers Blog

Given that the stated purpose of the CARES Act is to provide emergency assistance for individuals, families and businesses affected by the coronavirus pandemic, the intent seems to be that funds from the checks should be protected from garnishment or setoff so they may be used for food, medicine, living expenses or other necessities.

Credit unions should consider the possible reputational risk that enforcing right to setoff, recovery of a negative share/share draft balances from stimulus payments may have. Consider all the facts, as well as what the funds mean to members and what makes credit unions different from other financial institutions.

View one-pager on what to expect from the Economic Impact Payments.