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AG James Takes on Creditors Looking to Garnish Stimulus Checks

AG Letitia James leads a coalition urging the government to make sure stimulus checks go to families and not debt collectors.
stimulus checks, Letitia James, garnish, creditors, debt collectors, Secretary of Treasury

New York Attorney General James on Monday led a bipartisan coalition of 25 attorneys general, calling on the U.S. Department of the Treasury to make sure stimulus payments authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) end up in the hands of those intended and not debt collectors.

The CARES Act authorizes the Treasury Department to issue emergency stimulus payments of up to $1,200 for eligible adults and up to $500 for eligible children. Similar government relief programs intended to provide for Americans' basic needs — like Social Security, disability, and veterans' payments — all are statutorily exempt from garnishment, a legal mechanism that typically involves the "freezing" of funds in a bank account by creditors or debt collectors.

But — in what was a likely oversight by Congress to quickly pass the law — the CARES Act did not designate these emergency stimulus payments as exempt from garnishment, allowing debt collectors to potentially benefit before consumers.

In a letter to Treasury Secretary Steven Mnuchin and a second letter to the Consumer Financial Protection Bureau, the coalition asked the Treasury to take immediate action to ensure that the billions of dollars in emergency aid ends up with the families that need it most while requiring both lenders and credit reporting agencies to meet their obligations under the Fair Credit Reporting Act during the COVID-19 crisis.

"Millions of New Yorkers' impacted by COVID-19 wake up every day uncertain about their ability to pay medical bills, buy groceries, or pay rent," said Attorney General James.

"The CARES Act was intended to serve the American peoples' basic needs and provide a vital lifeline to all who have lost their jobs or seen their incomes reduced. The Treasury Department can stop suffering for millions of Americans by taking immediate action and protecting these payments before many of these payments go out."