Emergency payments of $ 1,200 are starting to arrive; Watch out for debt collectors: NPR
Courtesy of Sonja Scarseth
Updated April 15 at 11:19 a.m.ET
These federal payments of $ 1,200 to help Americans get through the coronavirus crisis have started coming into some people’s bank accounts through direct deposit. But a lot of people will have to wait longer – and there could be pitfalls, such as debt collectors grabbing the money before you do.
Those who receive checks in the mail may not see them for weeks or even months. To get money faster, millions of people will need to provide direct deposit account information to the IRS.
The IRS is just starting to put online portals for people to do. the was first uploaded on Fridays, but that’s just for people who don’t have to file tax returns. Another tool, launched Wednesday, will allow anyone to provide the IRS with account information for direct deposit if the IRS doesn’t already have it.
Lauren Saunders, of the nonprofit National Consumer Law Center, hopes the system will soon have several options for receiving the money. “I hope they can set up direct deposit to a traditional bank account or to a prepaid account,” she says. So the government could load the money onto some type of debit card that doesn’t require you to have a bank account.
Millions of low-income Americans do not have traditional bank accounts. And Saunders and other consumer advocates fear the people who need the money the most won’t be able to get it fast.
Begin Nora lives in Seattle, where the pandemic first hit the United States.
She is a violinist and the events were pretty quickly canceled.
“I lost all my income,” says Nora. She usually makes a living playing and teaching music in schools and elsewhere. She has a lot of different jobs – “at least 12 different jobs, so it’s a huge confusing conglomerate of things.” So she struggled to figure out how to navigate the state’s website to file for unemployment.
Her husband earns just above the minimum wage in an auto repair shop. Her hours have been reduced and they have three teenagers.
“It’s very scary,” said Nora. “Especially since we were already … a low-income family. We rely on our local school’s food bank and take-out meals to school.”
So the couple are really looking forward to getting this emergency government money. Since both filed their taxes electronically, payment should be made automatically and by direct deposit. “I check my bank account every day to see if it has arrived,” says Nora.
But the couple are in debt. Nora’s husband suffered a hernia and they are struggling to pay an unexpected medical bill of over $ 5,000.
Of course, many low-income people have unpaid bills, which can lead to debt collectors. And Saunders fears that millions of Americans could have their emergency government payments pulled straight from their bank accounts.
“It happens to people all the time,” says Farah Majid, lawyer at Legal Services Alabama. She notes that debt collectors often obtain court judgments against people, which allows debt collectors to get money from people’s banks.
If debt collectors can find money in a bank account, she says, “they can just get the money back, so it’s very easy for them to collect their money that way.” Some states have protections, but many allow collectors to collect large sums of money, says Majid.
And she says when a big check comes in, like a tax refund, collectors can pounce. So now she fears that collectors are preparing to seize these emergency payments.
“That’s what really scares me,” she said. “The people who need this money are desperately dependent on it right now, which is why the government is giving it to them, then could turn around and lose it unexpectedly and have no options.”
But there is something the government could do to try to block debt collectors. There is already a system to protect benefits such as social security. These government payments are coded in a special way.
“Banks automatically know they shouldn’t let collectors grab that money,” says Saunders of the NCLC. “We are trying to make sure that these stimulus payments are coded in exactly the same way, because they are for food and basic necessities, just like social security payments.”
There are some bipartite support for that. In the meantime, if you think the debt collectors or payday lenders with access to your bank account could get the money back, advocates say you’ll probably want to be vigilant to get that money out before them. Or you could have the money sent to another bank account, or to a prepaid card if that becomes possible, advocates say.
There is something else to watch out for beyond debt collection. Unless you are on Social Security, if you have not filed income tax returns in the past two years, you will not receive payment automatically. And if you’ve filed a return but received a check in the mail, you’ll get the payment much faster by registering with the IRS for direct deposit.
The latest information on how to do this, as well as how much money you should expect based on your income and your children, can be found on this site. IRS web page.
For people without a bank account who want to open one, the Saunders nonprofit tells people to go to joinbankon.org. This site has suggestions on how to do this, even if you’ve had trouble with bank accounts in the past, so you can get your government payment faster.