Banks authorized to grab stimulus checks off their customers

Banks can use emergency paychecks, given to US citizens to help them stay afloat amid the coronavirus pandemic, to repay outstanding debts.

Emergency coronavirus paychecks in the US could be forfeited to banks to repay outstanding debts, reports Prospect, suggesting that they won’t reach the hands of those who need it the most. 

Because some people’s $1,200 checks, which come by way of the CARES Act, are deposited straight to bank accounts, rather than sent through the mail, banks have the right to seize checks from their intended beneficiaries. 

That’s because neither Congress nor the Treasury prevented banks from collecting private debts. According to an audio recording Prospect obtained, Ronda Kent, chief disbursing officer with Treasury’s Bureau of the Fiscal Service, explained that “there’s nothing in the law that precludes that action.”

The money can also use the money to offset $1,000 in overdraft charges, even if someone thought that the account had been closed. “Payday lenders in many states have access to bank accounts and can seize that money as well,” says Lisa Stifler, head of debt collection work at the Center for Responsible Lending.

“At a time when people are desperate to buy food, the idea that anybody would grab [the $1,200 payments], let alone the banks they trust with their money, is appalling,” Lauren Saunders, associate director with the National Consumer Law Center, told Prospect. 

The lesson? Don’t trust; verify.