Senate bill would ban garnishment of relief funds by debt collectors
WASHINGTON — A bipartisan group of senators has introduced legislation to prevent debt collectors from garnishing coronavirus relief payments from consumers.
Sens. Sherrod Brown, D-Ohio, Ron Wyden, D-Ore., Chuck Grassley, R-Iowa, and Tim Scott, R-S.C., have sponsored legislation that would bar private debt collectors from garnishing the “recovery rebates” that were provided to consumers through the Coronavirus Aid, Relief, and Economic Security Act.
“Congress came together to pass the CARES Act, which provided money to help working families pay for food, medicine, and other basic necessities — it’s not for debt collectors,” Brown, the top Demcorat on the Senate Banking Committee, said in a press release. “Our bill will protect these funds and ensure working families receive the help they need.”
Grassley added that Congress intended for the rebates to help Americans weather the pandemic.
“We established these recovery rebates to help individuals and families through the tough times of this pandemic,” said Grassley, who chairs the Senate Finance Committee. “We did not establish them just so debt collectors could swoop in and undermine that purpose.”
The CARES Act provided individuals up to $1,200, along with an additional $500 for any dependent children. The legislation barred federal or state governments from offsetting or reducing the payments for past tax debts or other debts owed. But it didn’t prevent private debt collectors from garnishing the payments for unpaid debts. As reported, credit union groups have not signed on to calls for lawmakers to protect those funds, but some in the industry have suggested the government could help financial institutions by providing greater clarity on the matter.
The new legislation directs the Treasury Department to encode electronic payments so that financial institutions can identify and protect these payments from being garnished by debt collectors.
For payments sent in paper form, such as a check, the bill allows individuals to request that their bank or credit union protect the payments from being garnished by debt collectors and authorizes the financial institutions to do so.