Due to a quirk in how the most recent relief bill was passed, your $1,400 stimulus checks could be garnished by private debt collectors. There’s talk of follow-up legislation to fix the problem, but it might be too little, too late.
To avoid a Republican filibuster, Democrats passed relief legislation into law using a procedure known as budget reconciliation, which only requires a simple majority to pass a bill in the Senate. (The Senate is currently deadlocked at 50-50 between Republicans and Democrats, with Vice President Kamala Harris providing the tie-breaking vote as Senate President).
However, as part of budget reconciliation, a so-called “Byrd rule” limits what can be included in reconciliation bills. The Senate Parliamentarian enforces this rule, and sometimes they strip out provisions in what’s known as a “Byrd bath” (provisions removed from the bill are called “Byrd droppings”— no joke). Whether the debt collection provision was removed in anticipation of the Byrd Rule or stripped by the Parliamentarian, it was not included in the final bill.
This has opened the door for private companies to collect their debt, specifically those that have a court order placing a claim on your bank account. While previous checks were protected from private debt collectors, this check is the exception.
Note that the IRS will not garnish any of your check for government debt, like back taxes, or student loan debt. However, there’s an exception, as CNET points out: If your third stimulus check is missing and you claim it next year in your taxes as a rebate, the IRS could use some or all of the money for unpaid student loans or child support, according to the publication.
Per Fortune, advocacy groups such as the American Bankers Association are urging Congress to fix the problem and pass standalone legislation that prevents collectors from garnishing the money. Oregon Senator Ron Wyden (D), chairman of the Senate Finance Committee, has promised to do so, but there’s nothing currently in the federal bill that stops debt collectors from garnishing your relief check. However, if legislation moves quickly, it’s possible that garnishment could be prevented before debt collectors can get to it.
Additionally, some states, such as California, do prevent stimulus checks from being garnished, so you’ll want to check whether your state has such protections.
Lastly, if you’re at risk for garnishment, you can simply take the money out of the account once you see that it’s been deposited. As Lauren Saunders, associate director of National Consumer Law Center, suggests in an interview with Yahoo!: “If [people] think they’re at risk of garnishment they should watch their account, and take out the money immediately.”