Stimulus Checks/CARES Act

Is there any guidance regarding Economic Impact Payments (EIPs) for people with a Representative Payee?

Yes. On May 14, 2020 the Social Security Administration issued an update about COVID-19 Economic Impact Payments (EIPs) to certain groups of Social Security and Supplemental Security Income (SSI) beneficiaries, including beneficiaries who have their regular monthly payments managed by a representative payee. For the information about payments to beneficiaries with representative payees, please see the Economic Impact Payment section of the Social Security Administration’s COVID-19 web page.

Has IRS issued any new FAQs on Economic Impact Payments?

Yes. On May 6, 2020, the Internal Revenue Service (IRS) provided additional answers to frequently asked questions (FAQs) regarding the Economic Impact Payments (EIP) authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The FAQs are found on IRS's Economic Impact Payment Information Center page. The IRS added four new questions to the FAQs:

  • Q10. Does someone who has died qualify for the Payment?
  • Q11. Does someone who is a resident alien qualify for the Payment?
  • Q12. Does someone who is incarcerated qualify for the Payment?; and
  • Q41. What should I do to return an Economic Impact Payment? 

These IRS FAQs are directed at consumers so they do not place any new or different requirements or obligations on credit unions regarding EIPs paid to deceased individuals. ACH EIPs indicate the payment is a tax refund. With this, credit unions have no way of knowing whether a particular ACH transaction is a tax refund that is properly payable to a deceased member or an EIP. Rather than risk credit unions returning legitimate tax refund payments, the IRS indicates it is the responsibility of the individual receiving the funds to return the payment. However, nothing in the guidance or NACHA rules prevents a credit union from electing to return an ACH transaction as account holder deceased if its procedures indicate that is the correct action to take.

Are Stimulus funds exempt from garnishment or setoff against delinquent consumer loans or negative balance share accounts?

The CARES Act provides for specific protections for these funds and specifically prohibits offset for certain government and federal debts.

In California, Governor Gavin Newsom signed an Executive Order on 4/23/20 that exempts garnishment for any individuals receiving federal, state or local government financial assistance in response to the COVID-19 pandemic. The Order also states no financial institution shall have any lien upon, or any right of setoff, against CARES Act stimulus funds. Funds in any account held by an individual who received CARES Act stimulus funds are exempt from liens or setoffs—including, but not limited to, any setoff in connection with fees and overdrafts. In addition, the Order states any stimulus funds that have been used as offset prior to the Order should be refunded. Funds may be garnished for child support, family support, spousal support or criminal restitution for victims. Click here for the Governor’s announcement.

The League recognizes that overdrawn accounts made whole by stimulus funds presents a huge operational challenge. We have spoken with and are diligently working with the Department of Business Oversight on this financial industry issue. The League, together with the California Bankers Association, has sent this letter to the DBO in order to bring recognition of this issue to the Governor’s office, including the complexity in complying with this Order and the unintended consequences it has created. The League will keep you informed of what we learn. In the meantime, we urge you to comply to the best of your ability. Please ensure all staff are aware that if a member has had any stimulus funds automatically applied to cover an overdraft and wishes the overdraft to be reinstated, the credit union will take immediate action.

Click here for FAQs regarding the Executive Order.

Nevada issued a similar directive. On April 30, 2020 Nevada Governor Steve Sisolak issued Directive 017. Section 6 of the Directive states that setoffs from COVID-19 stimulus funds are prohibited. The Directive also stays garnishments other than child support, spousal support, or criminal restitution payable to victims.  Section 3 of the Directive states that funds or property garnished or attached after the date of the order shall be immediately returned to the debtor and the debtor shall not be required to claim an exemption. Similar to CA, the League is reaching out to the Nevada Financial Institutions Division (FID) regarding guidance with the operational challenges this presents.

On May 28, 2020 the Nevada FID sent a letter to the League responding to the League’s questions. Unfortunately the responses back from the NV FID do not provide much clarity on the operational challenges, but primary refer credit unions to follow their own internal processing procedures. The FID advises credit unions to define procedures similar to how they process social security benefits that are protected from levy, attachment, garnishment, or other legal process. Regarding the scope of Sec. 6 in the Directive, they do provide clarity that is it only applies to CARES Stimulus Checks and not PPP loan funds. Regarding the timing of the Directive and whether it means from the date of the Directive (4/30/20) or retroactive, the FID letter did not address this issue. However in checking with legal counsel we understand that there is nothing in the order itself specifically stating that it applies retroactively, and retroactivity is not implied by the words “are hereby.” That essentially means “as a result of this document or action.” That said, while there is nothing that says set-offs taken against stimulus funds prior to April 30 (the date of the order) need to be returned, credit unions may still want to remain flexible when it comes to providing members with full access to those funds as the clear intent is to protect those funds.

Is there a way to verify the CARES Act U.S. Treasury stimulus checks?

Yes. Credit unions can use the Treasury Check Information (TCIS) Check Verification site. In addition, the website contains information on U.S. Treasury Check Security Features. The Secret Service and Treasury have also issued a document that highlights Treasury check security features.

Are there additional FAQs related to the stimulus funds/deposits?

Yes – CUNA has provided this resource on some common question around the stimulus funds deposits.

Is there any guidance from NACHA regarding stimulus checks/ACH, particularly around closed accounts?

Yes. NACHA issued the ACH Network Rules Pandemic-Related Frequently Asked Questions (FAQs) based on information it has provided, information it has learned, and inquiries posed to NACHA, including questions about the Economic Impact Payments. The latest updates in the document are underlined and italicized. (4/15/20).

What happens if paper checks cause a surge in in-branch traffic?

We have confirmed that both the Treasury Department and Bureau of Fiscal Service oppose paper checks being distributed to consumers under the fiscal stimulus plan being considered by Congress and the President. Some credit unions were concerned they would not have enough cash on hand to meet a surge in members immediately cashing-out these checks. We will continue to monitor this situation as the conversation turns to electronic distribution.

Are credit unions required to cash stimulus checks for non-member consumers?

There is nothing in the CARES Act that requires credit unions to cash CARES Act stimulus checks for non-member consumers. However, both federal (§701.30) and California state licensed credit unions (14800.1) may cash checks for non-member consumers that are in the credit union’s field of membership.

Where can I refer my members to obtain more information on the stimulus package (CARES Act)?

We don't have concrete information at this time. If one of your members is looking for details on the CARES Act, we suggest referring California members to Sen. Diane Feinstein’s page or the U.S. House Committee on Financial Services FAQ site. For Nevada, please refer to Sen. Cortez Masto's page

Will the IRS contact individuals to obtain bank account information, Social Security numbers, or other personally identifiable information in order to distribute stimulus payments?

No. Beware of anyone claiming to be calling, texting, or emailing from the IRS seeking your personally identifiable information. The IRS will automatically distribute stimulus payments to eligible individuals either electronically where possible or by mailing a check. If you don’t file tax returns and receive Social Security benefits, the Social Security Administration will share your information with the IRS so eligible beneficiaries will receive their stimulus payments. For other eligible individuals who do not file tax returns, the IRS will initiate a public awareness campaign to provide information on how they can receive their stimulus payments. For the latest information on stimulus payments go to the Internal Revenue Service’s webpage on Coronavirus, available here.

The Consumer Financial Protection Bureau (CFPB) has created a webpage on Coronavirus-related scams, including for fraudulent vaccines, test kits, charities, and social security benefits, which is accessible here. You can also contact the CFPB via telephone by calling (855) 411-2372.

Source: U.S. House Committee on Financial Services FAQ site