RMAI, Banks Support Formal Protection for CARES Act "Recovery Rebates"

On Monday the Receivables Management Association (RMAI) sent a letter to Treasury Secretary Steven Mnuchin to express the organization's support for formal protections for "Recovery" funds sent to consumers under the CARES Act.

The association also advised the Secretary that it had sent an alert to members advising them that RMAI recommends they do not solicit any amount of recovery rebates or otherwise attach such funds to satisfy a valid debt or money judgment, to the degree these funds are ascertainable.

Finally, RMAI listed the enhanced hardship policies offered by members to consumers who notify them that they are impacted by COVID-19, including:

1. Temporarily suspending collection activities when a person demonstrates that he or she is experiencing significant financial hardship due to job loss or medical issues related to COVID-19;
2. We are encouraging our members to honor written and oral requests from consumers for relief through their hardship policy.
3. Ceasing collection activities when they receive documentation indicating that the consumer's only source of income is from exempt sources, such as Social Security or Supplemental Security Income benefits, and that the consumer has access to no other assets;
4. Obtaining consumer hardship contact information and recommending to any consumer experiencing a financial hardship due to COVID-19 that he or she reach out to the consumer support departments of the creditor, collection agency, or collection law firm engaged with them to report that he or she is impacted by COVID-19 and request a temporary cessation of collection activities;
5. Upon learning of consumer hardship, helping consumers in need who are directly impacted by COVID-19, either through illness or job loss, to understand their payment options, maintaining open lines of communications and extending temporary hardship assistance whenever possible;
6. Placing collection holds with respect to the consumer, which suspends collections on all of the consumer's accounts, not just on an account-by-account basis; and
7. Working with and being sensitive to consumers who encounter unforeseen circumstances.

The National Creditors Bar Association also announced their support for Recovery funds these funds to be treated similarly to other government payments that are exempt from garnishment (e.g., social security, disability, and veterans’ benefits).

On a related note, four major banking associations, including American Bankers Association, Bank Policy Institute, Consumer Bankers Association, the Financial Services Forum, and The Clearing House, urged Congress to exempt stimulus payments from court-ordered garnishments. The joint position stated,

"America’s banks stand ready to provide full access to funds appropriated for the explicit purpose of helping families make ends meet. Under the CARES Act, Congress exempted these payments from offset for debts owed to federal and state agencies, except in the case of child support, but did not exempt them from court-ordered garnishment to pay creditors. As a result, banks are obligated to treat them accordingly, which will impose a significant burden for some families facing unprecedented circumstances. We believe it is imperative that Congress make it clear that these payments are treated as benefits subject to the federal exemption from garnishment.”

Many consumer groups, as well as state and local lawmakers, have called for or enacted a ban on debt collectors taking stimulus funds from consumers' bank accounts to satisfy garnishments. Where this falls apart is that debt collectors have no way to know the character of funds contained in a consumer’s bank account or the source of those funds. Only banks can know the source/character of deposited funds. So the fact that the banking associations have requested action may help to close this loop.