$1,400 Stimulus Checks Are Coming, Should We Be Worried About Debt collectors?
By CultureBanx Team
- Private debt collectors can garnish your $1,400 stimulus checks
- African American and LatinX citizens owe $8,554 and $4,148 respectively of consumer debt
You may need to protect your impending $1,400 check, as debt collectors could take some of your COVID stimulus funds. The $1.9 trillion stimulus bill allows private debt collectors armed with a court order to take some or all of the pandemic relief funds and put it toward whatever you owe them. Clearly, this oversight in the bill is extremely problematic for African American and LatinX citizens that have large consumer debt burdens and owe $8,554 and $4,148 respectively.
Why This Matters: African Americans in particular are mired in large amounts of consumer debt, which tends to cost more than mortgages. Even worse, people of color tend to pay more for this debt than white families. Consumer debt thus adds to all families’ financial insecurity, but especially to that of people of color. Unfortunately, Congress couldn’t include language that barred garnishment of the stimulus check like they did back in December, because President Biden’s American Rescue Plan bill was enacted through a process called budget reconciliation, this allowed Democrats to pass it without Republican support.
Families often rely on consumer debt to make ends meet and to help them get ahead, but that debt is costly. White families actually owe a lot more consumer debt on average with $32,838, but they also held a lot more assets such as cars to offset that debt, in addition to earning more money that makes it easier to pay off that debt.
The risks to the financial security of families of color is even greater than these numbers suggest. Consumer debt amounted to 50.5% of all debt for African-Americans in September 2019.
Because of a greater reliance on more costly consumer debt and because of systematic obstacles in financial markets, Black families would pay about $735 each year in interest on $10,000 in debt, while whites would pay only $514 dollars. This is a difference of more than 40%.
What’s Next: There are some groups who are fighting to protect citizen’s stimulus checks like The American Bankers Association. This group along with 18 other banking and consumer trade groups have urged Congress to pass standalone legislation protecting the $1,400 checks from garnishment.
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