Banks Accepting Stimulus Checks For Unpaid Debts And Fees – What To Do
- Under the CARES Act, banks have the implied right to take stimulus payments which have been deposited into customer accounts to offset past due debts or unpaid charges.
- Four of America’s biggest banks have promised not to take people’s stimulus money, but many Americans who bank elsewhere are still vulnerable.
- The Treasury Department has the power to stop banks from doing this, and advocates are pushing it to do so.
- If you find that your payment has been taken by your bank, an expert recommends that you call your bank and ask them to reconsider. If that doesn’t work, draw attention to a congressman and post it on social media.
- Learn more about personal finance coverage.
The IRS has started sending stimulus payments to millions of Americans this week through direct deposit.
Electronic payments are supposed to get money into their hands much faster than a paper check, but some people’s money bypasses them altogether and goes to pay off negative balances.
According to a David Dayen’s report from The Prospect released on Tuesday, banks have the implied right to seize a coronavirus relief payment deposited into a customer’s account and use it to offset any delinquent loans or overdraft charges owed to the bank.
“There is nothing in the law that prevents this action,” said a Treasury Department official with reference to the CARES law during a phone call with bank officials. The bill, however, explicitly prohibits debt collectors from snatching stimulus payments for unpaid state or federal debts other than child support.
What to do if your bank takes your stimulus check
In some cases, clearing negative account balances is an automatic process. When money is added to an account, it is automatically applied to the negative balance.
If you have a negative balance and are worried about it happening to you – or it already is – there is unfortunately no one-size-fits-all solution. In a conversation with Business Insider, Lauren Saunders, Associate Director at National Center for Consumer Law, offered these tips:
1. Call the bank and insist they cancel it. If they don’t comply, ask to speak to a supervisor.
2. If that doesn’t work, contact a reporter who can publicize the current issue or call attention to a member of Congress who has the power to reach decision-makers.
3. Use social media to “do whatever you need to do” to publicize the problem.
People who do business with local credit unions or banks may be more vulnerable
This week the four biggest
according to a BI Intelligence report. USAA, which provides banking and other financial services to members of the military and their families, seized stimulus payments to offset debts, but quickly reversed his decision and promised not to touch the money for 90 days.– Wells Fargo, JPMorgan Chase, Citibank and Bank of America – said they would suspend collection of unpaid balances so customers can get their stimulus payment in full,
“A few different things are going on,” Saunders said. “The bigger banks are more concerned about reputation and more willing to do the right thing here. They also have more modern systems that allow them to deactivate compensation. They are less dependent on fee income, and smaller banks are more dependent on charging fees to their customers. In many cases, this leaves people who
and small, less protected local banks.
As Dayen pointed out in a follow-up story, “The Treasury has the ability to prevent this by drafting regulations that flag payments as federal benefits, prohibited to private collectors or banks. So far, they have not done so.”
“We are pushing the Treasury and Congress to act at the next possible opportunity, but a number of states have already acted,” Saunders told Business Insider. Until there, Massachusetts and Ohio both issued statements prohibiting private debt collectors from seizing stimulus payments because they are classified as federal aid.