April 21, 2020
Californians have begun to see money appear in their bank accounts: $1,200 for single people and an extra $500 for each kid. But for Californians with consumer debt, that money could just as quickly vanish.
The payments, part of the $2.2 trillion national coronavirus response package or CARES Act prohibits federal and state governments from intercepting the payments, except to collect child support debt. But the bill is notably silent on private debt collectors and banks, leaving people vulnerable to garnishments.
Consumer advocates say this defeats the purpose of cash relief meant to help the most financially unstable stay afloat. And while other states have stepped in to protect the stimulus checks from debt collectors, California has not.
“That’s not why they’re being issued, to settle old debt,” said Ted Mermin who leads the California Low-Income Consumer Coalition. “They’re being issued to put food on the table and keep the lights on.”
Consumer advocates want Gov. Gavin Newsom to put an immediate halt to most debt collection and new debt collection lawsuits. An executive order would protect the stimulus payments and “preserve the economic lives of millions of California residents,” they wrote.
Debt collectors say they won’t stand in the way. Cindy Yaklin, vice president of the California Association of Collectors, says her group is only opposed to a moratorium on all collection activities, which would stymie the industry.
The governor’s office did not respond to multiple questions about whether creditors should be allowed to take stimulus checks. In response to requests for comment, the governor’s office referred CalMatters to an executive order signed Thursday allowing stimulus checks for anyone late on child support payments to be sent to the custodial parent first before the government can apply the money to old child support debt.
Still, other elected officials are pushing for action. Attorneys general in 25 states, including California, and 14 U.S. senators led by California Sen. Kamala Harris sent letters urging the U.S. Treasury to designate the relief payments as exempt from garnishment.
“These emergency funds are meant to help our families and communities, not to line the pockets of debt collectors,” said California Attorney General Xavier Becerra in an email to CalMatters.