Officials in several states have warned creditors that the pandemic stimulus checks and deposits sent out by the federal government should not be used to pay off debts.
On Saturday, New York’s attorney general, Letitia James, said debt collectors and banks cannot seize or freeze the stimulus payments that were passed by Congress and President Donald Trump last month. A week ago, payments of up to $1,200 for an individual, $2,400 for a couple, and $500 for children were sent out to millions of Americans under the measure, which was passed to shore up economic losses suffered during the Chinese Communist Party (CCP) virus pandemic.
“These emergency stimulus payments were not designated as exempt from garnishment, allowing debt collectors to potentially benefit from consumers,” James wrote in a statement.
James argued that under New York’s state law, public benefits such as public assistance, social security, and veterans’ and retirement benefits “are exempt from execution, levy, attachment, garnishment, or other legal process by a judgment creditor seeking to satisfy a monetary judgment.”
Ohio Attorney General David Yost also warned creditors that the stimulus payments are protected under state law.
“The stimulus checks were intended to be used during an emergency–to put food on the table, keep the lights on, and a roof over our heads,” Yost said in a statement last week. “It wasn’t meant to pay off an old bill.”
More than 80 million Americans were slated to receive the payments by April 15, according to the Treasury Department.
Oregon Gov. Kate Brown, meanwhile, signed an order on April 17 that debt collectors and creditors cannot seize stimulus payments sent to residents.
“Many Oregonians, through no fault of their own, are struggling to pay their bills, their rent, or even buy essentials like groceries and prescription drugs,” Brown said in a statement. “These recovery checks were meant to provide relief, not reward debt collection agencies for preying on Oregonians who have lost their livelihoods due to the COVID-19 pandemic.”
Last week, more than two-dozen states attorneys general sent a letter to Treasury Secretary Steven Mnuchin to provide safeguards for Americans who might have their payments garnished.
“During this public health and economic crisis, the States do not believe that the billions of dollars appropriated by Congress to help keep hard-working Americans afloat should be subject to garnishment,” the officials wrote.
Some legal advocates have said that the stimulus checks don’t appear to be explicitly off-limits to creditors or debt collectors, noting a loophole in the language of the measure
Lauren Saunders, associate director of the National Consumer Law Center, told USA Today that her organization has [heard] a lot of stories for people whose bank accounts are frozen” due to garnishment.
A spokesperson for the Treasury Department has said the White House is looking into the issue.