WASHINGTON–NAFCU and CUNA have joined with 17 other consumer and financial industry organizations in urging lawmakers to protect the third round of economic impact payments (EIPs) from garnishment “so the money gets to the families who most need it.”
Allowing EIPs to be garnished could impose significant burdens on some families, especially those in communities of color, who are facing unprecedented circumstances during the ongoing pandemic, the organizations wrote.
According to the 19 groups signing the letter, EIPs are intended to help families purchase food and other necessities to make ends meet. Many people, the letter states, were already struggling prior to the coronavirus crisis and millions have now been laid off or had their hours cut. However, EIPs from the American Rescue Plan Act of 2021 are not exempt from garnishment, unlike the second round of EIPs from the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, the organizations noted.
“We believe it is imperative that Congress ensure that these next stimulus payments are treated as ‘benefits’ subject to the federal exemption from garnishment,” the letter reads. “Otherwise, the families that most need this money—those struggling with debt and whose entire bank accounts may be frozen by garnishment orders—will be not be able to access their funds. This group includes very low-income families with children, people who have been disconnected from work opportunities for a long period, and many low-income adults now raising children in their homes.”
Protections ‘Needed’
According to the letter, if Congress doesn’t immediately pass standalone legislation addressing garnishment, the new round of EIPs will not be protected from garnishment. Such protections are needed to “ensure that American families will receive these benefits as intended,” while also allowing financial institutions to follow the law and operate “within the practical realities of existing financial institution systems,” the groups said in the letter.
The letter further states that without clear statutory language that the EIPs are exempt from garnishment, depository institutions are obligated to comply with court orders and will be forced to freeze bank accounts when served with a garnishment order and, if the consumer does not assert an exemption, turn over some or all of a stimulus payment to judgment creditors.
The Signatories
Joining NAFCU and CUNA in signing the letter were the American Bankers Association, Americans for Financial Reform, Bank Policy Institute, Center for Responsible Lending, Consumer Action, Consumer Bankers Association, Community Development Bankers Association, Consumer Federation of America, Independent Community Bankers of America, Nacha, the National Association of Consumer Advocates, National Bankers Association, National Consumer Law Center (on behalf of its low income clients), Public Citizen, The Clearing House, and U.S. PIRG.
The full letter is available here.