February 25, 2021

NAFCU, trades ask Congress to address garnishment concerns in COVID package

Capitol dome

As the House prepares to advance the next round of coronavirus relief, NAFCU joined with several other financial institution and consumer groups to ask Congress to include language to protect economic impact payments (EIPs) from garnishment.

"The economic impact payments are intended to help families purchase food and other necessities to make ends meet," the groups wrote. "Many people were already struggling prior to the coronavirus crisis and millions have now been laid off or had their hours cut.

"…We believe it is imperative that Congress ensure that these next stimulus payments are treated as 'benefits' subject to the federal exemption from garnishment. Otherwise, the families that most need this money—those struggling with debt and whose entire bank accounts may be frozen by garnishment orders—will not be able to access their funds," they argued.

Without language to protect the EIPs from garnishment, depository institutions are obligated to comply with court orders and pay creditors who attempt to garnish and freeze bank accounts. While the CARES Act did not provide this protection for the first round of EIPs, the Consolidated Appropriations Act (CAA) did include language to protect the second round of EIPs from garnishment.

The groups asked Congress to re-insert the garnishment language from the CAA into the American Rescue Plan Act "to ensure that American families will receive these benefits as intended to fulfill our common goal of protecting these payments from garnishment within the practical realities of existing financial institution systems."

The House Rules Committee is set to review the American Rescue Plan Act tomorrow before it heads to the full chamber for consideration.

NAFCU and industry trade groups have also asked for additional clarity regarding processing electronic and paper check transactions to ensure credit unions and other financial institutions have the resources and guidance needed to efficiently get funds to consumers. The association will continue to advocate for provisions that allow credit unions to effectively get these funds to members.