You've probably seen the inspiring ads on television from USAA, with smiling veterans and service members touting their services. That company is the United Services Automobile Association that says it "proudly serves millions of military members and their families with competitive rates on insurance, banking and investment services." Unless that military member or veteran has a debt with USAA. In that case, they're looking out for the bottom line.
In his now ongoing series about the refusal of the Treasury Department to prevent banks and private creditors from seizing coronavirus stimulus checks, David Dayen relates stories he's heard from USAA customers. One is the wife of a disabled veteran whose family lost $3,400 of their CARES Act payment to offset debt in an account at USAA that the family had closed last year. Carrie (not her real name) told Dayen that after her husband was injured, they had been overdrawn, but said they closed the account after some $8,000 in fraudulent use on it. The bank said they didn't have enough evidence of fraud to return the money, but "charged off" the account, writing it off as unrecoverable. The family moved their accounts to a community lender, but this USAA account was the direct deposit the IRS had on file. So that's where the stimulus money for the family went and despite the fact that the account was dead, kept by USAA instead of being returned to Treasury.
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"I'm out of work and my husband is injured and can't work,” Carrie, the wife, told Dayen. "We don't know where rent is going to come from now. It was going to help my 18-month-old get her meds. I'm at a loss for words, they don't care." When she called the bank to plead the family's case, she says the USAA rep told her she and her husband "shouldn't have gotten into debt in the first place."
A USAA spokesperson tells Dayen that "a stimulus payment could be reduced when we execute legal garnishment or lien requirements […] a reduction can also occur in circumstances when the stimulus payment is deposited into an account with a negative balance" but that the bank is "continuing to examine ways to address such occurrences during this pandemic." One immediate way this could be fixed is by Treasury Secretary Steven Mnuchin issuing clarification—as Democratic Sen. Sherrod Brown and others have been urging for the past two weeks—to stop banks and private creditors from seizing these payments. The USAA spokesperson told Dayen it would support "legislative or administrative action to exempt such future payments from these legal requirements." Which it could do if it really wanted to, anyway.
Following up on Dayen's reporting, The New York Times has more stories of struggling people who banks and credit unions have seized stimulus payments from, and efforts by Democratic senators Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio to get the banks to help out, while Mnuchin refuses to. "For weeks, we have pressed the Treasury Department to exercise its authority and ensure that Americans receive the full amount of their stimulus payments," the senators wrote in a letter to Rob Nichols, the chief executive of the American Bankers Association. "While Treasury has refused to follow congressional intent, that does not give banks license to steal the stimulus payments from their customers."
Having experienced enough public backlash over the past decade, the nations' four biggest banks—Bank of America, JPMorgan Chase, Citibank, and Wells Fargo—have paused collection on any negative account balances so that customers can access their stimulus funds. So it is clearly within the banks' ability to do so, but the guidance from Mnuchin is all that it would take for all of the nation's private creditors and financial institutions to do it.
Twenty-five state attorneys general have been pressuring Mnuchin as well, writing "During this public health and economic crisis, the states do not believe that the billions of dollars appropriated by Congress to help keep hardworking Americans afloat should be subject to garnishment."
