All around the country, Americans are receiving a new round of American Rescue Plan payments in their bank accounts — only, in many states, to have the payments seized by debt collectors. Fortunately, Californians do not have to worry. A year ago, in April 2020, Governor Gavin Newsom issued an executive order to prevent debt collectors from seizing payments under the CARES Act — or any other later pandemic relief payments like the ones the federal government is sending out now.
Governor Newsom’s order was issued to protect the CARES Act payments from March 2020, but it also explicitly shields from garnishment or levy “any other federal-, state-, or local-government financial assistance made available to individuals in express response to the COVID-19 pandemic.” The only exceptions are for child and spousal support, and criminal restitution.
In Congress, Senators Ron Wyden (D-Ore.) and Sherrod Brown (D-Ohio) attempted to pass federal legislation to protect the payments from being garnished by private debt collectors, but the bill was blocked
The March 2020 $1200 CARES Act payments were protected from state and federal government garnishment, and the $600 payments from December were shielded against all creditors. Unfortunately, because of quirks in the reconciliation process used to pass the American Rescue Plan, the most recent payments did not receive the same protection.
These economic impact payments are meant to alleviate the financial distress caused by the pandemic — not to line the pockets of debt collectors. While so many people have been struggling to pay rent and utilities, some debt collectors made record-breaking profits
Congress needs to fix this problem. The federal government can still act — Governor Newsom’s order was issued after the CARES Act payments had been issued, and directed debt collectors to return any seized funds. But Congress needs to act quickly.
California, to the relief of millions of its residents, has already done so.