Countless Californians are receiving their stimulus checks. And while the CARES Act prevents most government-related garnishments, private collectors and banks can still seize money from debtors.
However, a recent executive order from governor Gavin Newsom could change that. The order could limit California creditors’ ability to seize COVID19-related payments. This comes as consumer advocates push the state to halt current debt collections and creditor lawsuits.
Consumers argue these checks are for financial support
As the pandemic damages California’s economy, people are struggling to make ends meet. Because of this, many consumers argue that stimulus and other support payments should not be garnished. But according to a recent report, 1 in 4 Californians owe some form of unpaid debt.
California is already creating other collection barriers
Massachusetts, Ohio and New York have already issued guidance for their stimulus checks that align with debtor demands. Aside from the executive order, California does not have laws that shield stimulus payments. Because of this, the state could take action against banks and debt collectors, claiming payment seizures violate due process.
On top of that, the state legislature passed a law that could protect the first $1,724 in a person’s bank account from garnishment. It could also bar collectors from receiving payments from debtors. In fact, that money could even go back to the consumer if a collector does not contest their claim. However, the order does not go into effect until early September.
New measures could harm California’s collection industry
Debt collectors are aware of the issues facing consumers amid the pandemic. While businesses should keep these circumstances in mind, those with uncollected debts are also struggling. Unfortunately, the actions from California officials could hurt these businesses’ ability to recover debts and stay afloat.