Banks May Be Taking Stimulus Checks from Indebted Americans [Opinion]

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In Brief
  • There are currently no restrictions on banks taking the funds Americans were promised via the CARES Act.

  • Banks can seize these funds if the individual is indebted.

  • The Treasury declined to outright prevent banks from doing this.

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Banks are not prevented from taking the money being direct-deposited into checking accounts if the recipient has significant debts.



Since last week, Americans have been reporting that their CARES Act payments from Congress are finally appearing in their bank accounts. Wired directly to eligible recipients, the process has been made possible by cooperation with banks.

However, some banks seem to believe this gives them the right to mediate the process to collect debts on behalf of creditors.



Banks Withholding Stimulus Checks?

Although no bank has thus far withheld CARES Act checks, it’s not illegal. As The American Prospect reports, Congress did not exempt these payments from private debt collection. [The American Prospect]

This effectively means that banks can transfer the payments from Americans’ hands to creditors.  If an individual has a delinquent loan or past-due fees, banks have the right to seize these funds for themselves.

According to Lauren Saunders, associate director of the National Consumer Law Center,

“At a time when people are desperate to buy food, the idea that anybody would grab [the $1,200 payments], let alone the banks they trust with their money, is appalling.”

As of now, it seems unlikely any bank would go through with seizing these funds because it would bring an avalanche of bad publicity. Still, however, it’s not out of the question that banks could be predatory towards poorer, indebted people who really need this money.

Get Rid of the Middleman

We are forced to trust the banks to not seize money that is owed to us from the government. However, the middleman (i.e. the bank) should not be given this power. Isn’t that what cryptocurrencies are all about—people being their own bank?

BeInCrypto has often reported on banks restricting money from depositors. Last month, branches in New York suffered cash shortages amid the coronavirus panic. The media continues to warn people not to overreact and withdraw their funds from banks. 

However, as those of us in the cryptocurrency space know, banks are not merely places to hold money. Instead, banks use this to invest and make more profit without backing up their depositors completely. 

In short, the fact that banks can legally seize one’s money on behalf of creditors illustrates why we need to decentralize the financial world. It’s a clear case of why we need monetary sovereignty outside of banking.


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Raised in the U.S, Lucian graduated with a BA in economic history. An accomplished freelance journalist, he specializes in writing about the cryptocurrency space and the digital '4th industrial revolution' we find ourselves in.

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