On March 15, 2021, Governor Lawrence Hogan, Jr. issued an order prohibiting financial institutions from holding federal stimulus rebates — issued under the federal American Rescue Plan Act of 2021 (ARPA) — in connection with private creditor garnishments. The order — in place until Governor Hogan terminates the COVID-19 state of emergency — also prohibits Maryland banks and credit unions from exercising a right of setoff to the extent that funds are traceable to a federal stimulus rebate.
For similar federal stimulus payments in 2020, the Governor issued supplementary guidance clarifying that a bank’s or credit union’s application of federal stimulus payments to a negative account balance (when such federal stimulus payments were deposited into the account with the negative balance) was not a prohibited setoff or offset. Similar guidance has not been issued in connection with the ARPA stimulus payments as of the date of this alert, March 16, 2021.
It is anticipated that incoming automated clearing house (ACH) deposits for the ARPA payments will be coded similar to other federal benefit payments. Garnishees, such as banks and credit unions, should be prepared to review incoming deposits to identify payments coded like other federal benefit payments, so that the ARPA payments can be handled like other protected federal benefit payments. For stimulus rebate payments not coded in this manner or that are deposited via check, garnishees, such as banks and credit unions, must exempt such stimulus rebate funds upon an account holder’s request.
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