In brief

  • US banks can requisition coronavirus checks to repay debt.
  • Congress and the Treasury haven't prevented this.
  • That means that the $1,200 checks might not reach everyone.

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.”

According to the Treasury’s Bureau of the Fiscal Service, the banks can use the cheques to pay off debts. Image: Shutterstock.

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

According to a later article by The Prospect, US Treasury Secretary Steven Mnuchin, who planned the CARES act, knew that banks would be able to take the cheques but didn't put in a measure to stop them.

The lesson? Don’t trust; verify. 

Please note: This article has been updated to include information from a later article.

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