Treasury examining whether it can prevent debt collectors from seizing coronavirus checks

The Treasury Department is looking into whether it has the authority to prevent coronavirus relief checks from being seized by private debt collectors, a source familiar with the situation confirmed to The Hill.

The development comes after politicians on both sides of the aisle have urged Treasury to take action to prevent the direct payments from being garnished.

The IRS started issuing one-time direct payments to people last week. Most Americans are eligible for payments of up to $1,200 per adult and $500 per child.

Under the text of the law that established the payments, the payments cannot be reduced if people owe back taxes or are behind on making payments to federal or state agencies, but can be reduced if people are behind on child-support payments. The law does not explicitly exempt the payments from being garnished by private debt collectors.

Lawmakers and state attorneys general have been pressing Treasury to take regulatory action to prevent the payments from being seized by banks and private debt collectors, arguing that taking away payments goes against congressional intent and would hurt people who need their rebates in order to cover key expenses.

Trade associations representing banks and credit unions have been urging Congress to clarify that payments aren’t subject to court-ordered garnishment. They said in a letter to lawmakers last week that because of the way the law is written, they have to abide by court-ordered garnishments, but that many banks have taken steps to ensure that their customers can access their full rebate even if they have a negative bank-account balance.

The Washington Post first reported Monday that Treasury is examining whether it can prevent the payments from being seized.