Protect Your Stimulus Payment from Debt Collectors

(This information was collected in collaboration with, and largely contributed, by Texas Appleseed) (April 22, 2020)

Eighty million households received payments from the US government in the first round of payments under the CARES Act.  Those payments currently are not protected from many debt collectors, payday lenders, and bank/credit union fees. However, you may take the following actions to protect your money.

1. How do I stop a payday lender or other lender from taking the stimulus money as it hits my account?

You have the right to stop any electronic payments coming out of your account, according to the Consumer Financial Protection Bureau.  

Steps to Stop Electronic Payments:

Source: https://www.consumerfinance.gov/about-us/blog/you-have-protections-when-it-comes-to-automatic-debit-payments-from-your-account/ 

Federal law provides certain protections for recurring automatic payments. You have the right to stop a company from taking automatic payments from your bank account, even if you previously allowed the payments. 

If you decide you want to stop automatic debit payments from your account:

  1. Call and write the company. Tell the company that you are taking away your permission for the company to take automatic payments out of your bank account. This is called “revoking authorization.” Click here for a sample letter . Payday lenders often include an address in the contract where you need to send notice
  2. Call and write your bank or credit union. Tell your bank that you have “revoked authorization” for the company to take automatic payments from your account. Click here for a sample letter . Some banks and credit unions may offer you an online form.
  3. If a payment is scheduled soon. Do this first. Even if you have not revoked your authorization with the company, you can stop an automatic payment from being charged to your account by giving your bank a “stop payment order.” This instructs your bank to stop allowing the company to take payments from your account. Click here for a sample “stop payment order.” 
    1. To stop the next scheduled payment, give your bank the stop payment order at least three business days before the payment is scheduled. You can give the order in person, over the phone or in writing.
    2. To stop future payments, you might have to send your bank the stop payment order in writing. If your bank asks for a written order, make sure to provide it within 14 days of your oral notification.
    3. Be prepared to include a copy of your revocation to the company (see step 1) with your written stop-payment order.

Monitor your accounts. Tell your bank right away if you see a payment that you did not allow (authorize), or a payment that was made after you revoked authorization. Federal law gives you the right to dispute and get your money back for any unauthorized transfers from your account as long as you tell your bank in time. Click here for a sample letter.

Be aware that banks commonly charge a fee for a stop payment order. Further, cancelling your automatic payment does not cancel your contract with the company. If you want to cancel a contract for a service, like cable or a gym, be sure to cancel your contract with the company as well as telling it to stop automatic payments. If you cancel an automatic payment on a loan, you still have to make payments on that loan.

2. As soon as the stimulus money hit my account, my bank or credit union took it to cover overdrafts or other payments that I owed.  Can I get the stimulus money back?

Many government payments are protected from garnishment, like unemployment benefits and social security, but because of a loophole in the law, Congress did not protect the current stimulus payments that are going out.  Though legally, they can take the money, some banks are saying that they will not take it.  If this happens to you, contact your bank or credit union and ask that they release the funds.  Also, you may want to contact your representatives in Congress, the media, and complain to the state or federal regulator.  You can submit a complaint through the federal Consume Financial Protection Bureau at this link.

3. A debt collector has frozen my account and I can no longer access it to use the stimulus money that was recently deposited.  What can I do?

The CARES Act protects the stimulus payment from collection of certain federal and state debts, but not for child support owed. 

If you have been sued for a debt that is not covered by the CARES Act protections and there is a court judgment against you, a debt collector may try to garnish your account by freezing it so that you cannot access the money in the account.  

Starting April 9, the Texas Supreme Court issued an emergency order that stops new efforts to freeze accounts to collect consumer debts through May 7.  The order could be extended.  

For people whose accounts were frozen before April 9, the order directs the court and parties to reach a quick resolution to the matter.  You may need a lawyer to help.  For legal information, including access to a chat feature, please visit:  TexasLawHelp.org.

4. I haven’t gotten my stimulus money yet.  When can I expect it?

If you have not filed taxes in 2018 or 2019, and you do not receive federal benefits, like social security or veteran’s benefits, you may need to take action to get the money.  Go to this IRS website for information on how to file; how to enter deposit account information; to get the stimulus money electronically; and to get updates on the status of your payment.  If you do not have an account, you may be able to open one through these Bank On certified accounts, even if you have had trouble in the past with overdrafts or other issues.  Check the list to see if there is a bank or credit union in your area with a certified account.

If you are waiting for a paper check, it could take a few weeks to a few months for the checks to arrive.  If you get a paper check and can’t deposit it into an account, look for free check cashing in your area.  Many of the large banks, including JP Morgan Chase, Bank of America, and Wells Fargo, and some grocery stores are cashing the stimulus checks for free even for noncustomers. You may be able to call and ask for details before you go in.

Watch for scams!

Phone calls, emails, texts and social media posts trying to collect bank account information or social security numbers are scams. Protect yourself.  Don’t share sensitive information.

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