April 20, 2020:
On Saturday April 18, 2020, New York’s attorney general said banks and debt collectors cannot freeze or seize stimulus funds.
Under New York law, certain types of property — including public benefits like public assistance, social security, and veterans’ and retirement benefits — are exempt from execution, levy, attachment, garnishment, or other legal process by a judgment creditor seeking to satisfy a monetary judgment. Under the attorney general’s directive, CARES Act payments are similarly protected and will be treated as statutorily exempt. To review the attorney general’s directive, click here.
Effective immediately, CARES Act payments to citizens of New York are exempt from garnishment. Therefore, any person who garnishes or attempts to garnish these payments has engaged in fraudulent or illegal conduct as a matter of law under Executive Law § 63(12) and deceptive conduct under General Business Law § 349. In addition, any person who knowingly or recklessly provides substantial assistance to a creditor or debt collector in garnishing CARES Act payments will face aiding and abetting liability under Dodd-Frank.
So, what does this all mean? First, garnishments in effect today in New York could become a problem if they attempt to freeze or levy against CARES Act payments. Members should take steps to ensure garnishment orders in effect today do not include the seizure of CARES Act payments. Second, members should take steps to halt garnishments in the future that may include or attempt to include CARES Act payments.
The New York attorney general’s directive should be taken very seriously. In the announcement on Saturday, the New York attorney general essentially laid the grounds for four types of actions:
- Administrative enforcement action by her office;
- Administrative enforcement action by the state under New York’s unfair or deceptive practices act statute;
- Administrative enforcement action by the Consumer Financial Protection Bureau or Federal Trade Commission under the unfair or deceptive practices act section of the Dodd-Frank Act; and
- Private action by a citizen of New York under the Fair Debt Collection Practices Act.
On April 17, 2020, the Governor of Oregon issued a number of directives to protect the CARES Act Recovery Rebate payments to individuals from most garnishments. As we have seen in other states, the directives were issued so the recipients of the payments are able to use the money to pay for their housing, food, medical and other essential needs during the COVID-19 emergency period. The Order instructs financial institutions to treat economic relief being provided by the CARES Act as any federal benefit, such as Social Security payments. It is effective immediately and remains in effect until terminated by the Governor. To review the Order, click here.
So, what does this all mean? A number of exemptions are noted in the Governor’s Order. These exemptions pertain to garnishments seeking payment on a judgment in a criminal action that requires the defendant to pay restitution; or a civil judgment against someone who has been convicted of a criminal offense. The Order does not specifically state garnishments currently in place must be lifted but a close reading of the Order suggests the payments are protected from all garnishment actions in place today and in the future. Members who issue garnishments in Oregon should be mindful of this new Order and consult with independent legal counsel for further information.
This alert is intended for members of the Receivables Management Association International and is for informational purposes only and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.