State Senate Democratic Leader Jay Costa, Jr. (D-Allegheny) has unveiled legislation that would protect federal stimulus payments to people from being preyed upon by creditors and debt collectors. Costa’s bill would prohibit the garnishment of federal CARES Act payments -- such as the $1,200 stimulus or $600 unemployment compensation (UC) booster payment -- from garnishment.
Read more: “Unfortunately, in this time of extraordinary financial distress there are some creditors or collection firms that will try to prey on individuals at their most vulnerable time,” Costa said. “During the pandemic, when so many are hurting, the last thing citizens should have to deal with are aggressive payment collection firms. The federal stimulus funds are needed by individuals and families to meet financial obligations now and should not be subject to garnishment for past debts.”
Costa said his bill would protect payments during the COVID-19 pandemic. The measure would:
• Suspend the ability of private creditors and collections agencies to attach any federal stimulus or UC benefits for garnishment to satisfy debts;
• Suspend state and local government debt garnishment, including for medical and student loan debt collection (this would not apply to child support);
• Prohibit state-chartered banks and credit unions from seizing stimulus checks or UC payments; and
• Extend the debt collection suspension period for at least 60 days after the state emergency disaster declaration has been lifted.
Costa said some experts have claimed that one in three Americans with debts in collection could face seizure. He said governors and Attorney Generals in other states have taken step to shield the payments from bill collectors.
“Congress passed the CARES Act to provide funds for individuals and families to survive the economic upheaval caused by the pandemic,” Costa said. “Bill collectors should not be able to step in, seize a portion of the funds and put more stress on families.”
Costa said he plans to introduce the bill in the next week.