Senate Republicans Block Bill to Keep Stimulus Payments from Garnishment

Senate Republicans blocked legislation Thursday that would have prevented the federal Economic Impact Payments from being garnished for the payments of debts owed.

Without such legislation, credit union and banking trade groups have said they may have to allow court-ordered garnishment of the payments.

Senate Finance Committee Chairman Ron Wyden (D-Ore.) Thursday attempted to bring up the legislation he and Senate Banking Committee Chairman Sherrod Brown (D-Ohio) sponsored to prevent garnishment.

However, Banking Committee ranking Republican Sen. Pat Toomey of Pennsylvania objected to a unanimous consent request to bring the legislation to the floor.  Toomey said that the legislation would have prevented the payments from being garnished for legitimate purposes. He said, for instance, a “deadbeat dad’s” stimulus payment could not be garnished to pay back child support.

Toomey also said the only reason the garnishment provision was not included in the legislation was that Democrats pushed the bill through Congress using the budget reconciliation process. That process has strict rules concerning the types of provisions that may be included in a budget reconciliation bill.

Following Toomey’s objection, Brown blasted Republicans for blocking the garnishment legislation, which was included in a previous economic stimulus bill.

 “This vote was about who’s side you’re on, and Senate Republicans chose to protect debt collectors instead of workers and their families.,” he said. “We will not stop fighting to protect Americans’ stimulus checks.”

Democratic regulators have urged financial institutions not to garnish the impact payments.

“Because the new law lacks necessary guardrails, I am very concerned that some financial institutions may soon make shortsighted decisions to use these stimulus funds to instead pay for overdraft fees, outstanding debts, and other liabilities,” National Credit Union Administration board Chairman Todd Harper said during Thursday’s board meeting.

Consumer Financial Protection Bureau Acting Director Dave Uejio said that financial institutions have pledged not to garnish the payments whenever it can be avoided. “The Bureau will continue to closely monitor consumer complaint data and other information that will help us to better understand how these issues are affecting consumers,” he said.

However, in a letter to members of Congress last month, financial trade groups, including CUNA and NAFCU said that in some cases, banks and credit union might not have a choice.

“While depository institutions and even many debt collectors and buyers believe that economic impact payments should be exempt from garnishment orders, depository institutions are obligated to comply with court orders, and unless Congress includes the attached language, they will be forced to pay some creditors who attempt to garnish and freeze bank accounts,” they wrote.

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