The Senate late last week passed legislation that would protect federal pandemic economic stimulus payments to individuals from garnishment—an issue that may gain importance now that Congress is considering another round of payments.
Under the bill, S. 3841, passed by the Senate by voice vote, the Treasury Department would be required to code any direct deposit of stimulus payments so that financial institutions can protect them from being garnished by debt collectors. For other payments, such as checks, individuals would be allowed to request that the stimulus payment be protected.
Financial institutions have come under heavy criticism for failing to protect stimulus payments.
Most recently, National Credit Union Administration board member Todd Harper, in an op-ed in Credit Union Journal, blasted some credit unions for using the stimulus payments to pay off outstanding debts.
A coalition of trade groups, including the Credit Union National Association and the American Bankers Association, said financial institutions had no choice since Congress failed to define the payments as subject to preemption from garnishment. Some states have laws that protect such payments, but in states that lack such statutes, depository institutions have no choice but to comply with court-ordered garnishments, they said.
Sponsors of the Senate bill called on the House to immediately consider it.
“During this public health crisis, Congress must ensure that hardworking Americans have every tool they need to rebuild and recover from the economic fallout of this crisis,” said Senate Banking Committee ranking Democrat Sherrod Brown of Ohio, one of the bill’s sponsors.