Stimulus checks could be clawed back by debt collectors unless the state intervenes further

Federal stimulus payments have started showing up in people’s bank accounts, but some of those most in need of financial assistance amid the country’s growing economic crisis risk diverting it to debt collectors.

Consumer advocates “fear that thousands of Illinois will see their stimulus checks consumed by non-essential loan payments instead of basic needs like housing, food and medicine,” said Brent Adams, vice-president. senior president of policy and communications at the Woodstock Institute.

Governor JB Pritzker has taken steps to protect stimulus payments, but more could be done – especially since the US Treasury Department has so far failed to act on Congressional authorization under which he could exempt stimulus payments from debt collection.

Pritzker placed an order last month suspension of automatic entries and another order this week banning court orders that allow debt collectors to seize bank accounts – actions that consumer advocates applauded. But the state could go further by requiring lenders to stop direct debits from bank accounts because Woodstock and other groups recommendedAdams said.

State Senator Jacqueline Collins also called on Prtizker to take action to prevent payday lenders, installment lenders and collection agents from withdrawing funds from stimulus payments without specific permission from consumers.

“Payday loans and debt collection disproportionate impact on low income and people of color“Collins said in a letter to Pritzker.” And early indicators show that COVID-19, like almost all health indicators, is having a disproportionate impact on these same populations. So this financial emergency is compounded for my constituency and for communities of color in general. ”

Other states have taken strong action, advocates say. Massachusetts “found the debt collection activities during the emergency unfair and deceptive”, And New York and California called on financial institutions to waive late fees and overdraft fees and offer loan extensions or deferrals and other measures to avoid defaults.

“Consumers who have given permission to make deductions have given it during normal quoted periods,” Adams said. “But the whole ball game has changed. We think it’s unreasonable to take clearances that were given under completely different circumstances and say they should still be valid today.

Without state action, he said, “these payments risk being diverted before the consumer even knows they are there.” This is not the intention of the stimulus, he added.

Banks and businesses are already receiving a multibillion-dollar bailout from the federal government – in many cases a rescue plan for their own irresponsibility and profit – while families receive just enough to help them for a few weeks. With the federal government on the sidelines, the state must do what it can to make sure that the money gets to these families.

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