WASHINGTON — The Senate passed legislation Thursday that would prevent debt collectors from diverting coronavirus relief payments to pay off a consumer's outstanding debt.
The bill introduced by Sens. Chuck Grassley, R-Iowa, Tim Scott, R-S.C., Sherrod Brown, D-Ohio, and Ron Wyden, D-Ore., would bar private collectors from garnishing the “recovery rebates” that were provided to consumers through the Coronavirus Aid, Relief, and Economic Security Act. It passed unanimously.
“The House must immediately take up this bill and ensure that the money allocated to working families by Congress goes to pay for food, medicine, and other necessities, not to debt collectors,” said Brown. “Americans are still suffering from this public health and economic crisis and Congress must step up and provide additional relief.”
The CARES Act provided individuals up to $1,200, along with an additional $500 for any dependent children. The legislation barred federal or state governments from offsetting or reducing the payments for past tax debts or other debts owed. But it didn’t prevent private debt collectors from garnishing the payments for unpaid debts.
The Senate-passed legislation, which is supported by the
For payments sent in paper form, such as a check, the bill allows individuals to request that their banks protect the payments from being garnished by debt collectors and authorizes the financial institutions to do so.
Greg Baer, president and CEO of the Bank Policy Institute, lauded the Senate passage of the legislation.
“Stimulus payments were intended to be a lifeline for individuals and families experiencing economic hardship due to the coronavirus, not a windfall for debt collectors,” Baer said in a press release. “We thank leadership in the Senate for working on a bipartisan basis with the National Consumer Law Center and the banking industry to fix this unintended consequence to ensure that stimulus money ends up in the hands of Americans struggling to get through the coronavirus crisis.”
