In the federal government’s ongoing effort to revive the U.S. economy and help people harmed by the economic damage wrought by the coronavirus pandemic, an important detail has gone under-noticed:  the most recent set of federal stimulus payments to individuals are subject to garnishment by creditors.  And this fact is creating legal and operational challenges

We look at the impact of federal and state law including relevant CARES Act provisions, state garnishment directives, and federal preemption, identify issues banks should consider in handling garnishments or exercising setoff rights, and offer suggestions for mitigation measures banks can take as they decide how to address the challenges in this area.

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