New York Attorney General Letitia James on Saturday issued official guidance to New York State banking institutions, creditors, and debt collectors, making clear that financial relief provided through stimulus payments are exempt from garnishment under New York law.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which will send billions of dollars to Americans struggling as a result of the economic fallout of the coronavirus disease 2019 (COVID-19) public health crisis, originally were not designated as exempt from garnishment, allowing debt collectors to potentially benefit before consumers.

The AG’s action will protect millions of New Yorkers and block debt collectors from raiding checking outs where the payments will be deposited.

“This official guidance makes clear that banks and debt collectors cannot freeze or seize stimulus funds that are on their way to New York families, and any institution that violates this guidance will face swift legal action from my office,” said James.

Attorney General James’ guidance is based on multiple state and federal consumer protection laws and clarifies that any attempt to garnish stimulus funds from New Yorkers will be treated as a violation of these laws.

Under New York law, the action advises banking institutions that CARES Act payments will follow similar legal processes as other public benefits, and any person or entity that garnishes or attempts to garnish these payments will have violated multiple state and federal consumer protection laws.

The guidance also addresses what are known as “setoffs” — where a bank seizes funds in a consumer’s account at the bank to pay a debt owed to the bank. CARES Act payments are now exempt from this abusive and unfair practice, and Attorney General James is urging all financial institutions to follow the lead of the nation’s largest banks and halt collection on negative account balances to give their customers access to vital stimulus payments.

“As the coronavirus crisis continues to wreak havoc on our society, I will do everything in my power to protect the wallets of every New Yorker,” said James.

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