Update from FDIC regarding Economic Impact Payments
20. [04/23/2020] Offset of Deposits. Are Economic Impact payments subject to offset for charged-off loans or other obligations to the financial institution? The CARES Act does not restrict banks from using economic impact payment funds to pay consumers’ old debts, e.g., delinquent loans or overdraft or other fees, where permitted by applicable law. However, the FDIC and other bank regulatory agencies have issued statements encouraging institutions to work with consumers and communities affected by COVID-19. For more information on assisting consumers in light of COVID-19 developments, see the FDIC’s Statement on Financial Institutions Working with Customers Affected by the Coronavirus and Regulatory and Supervisory Assistance (FIL-17-2020), issued on March 13, 2020. COVID-19 related developments continue to evolve. We recommend that you monitor the U.S. Treasury Department’s website in the event it issues any new information addressing the offset of economic impact payments. 16 The criteria are within the definition of statutory multifamily mortgage in part 324.2. Loans that meet the definition of statutory multifamily mortgage are eligible for 50 percent risk weight per section 32(g). 12
21. [04/23/2020] Garnishment. Are Economic Impact payments subject to garnishment? Specific exemptions apply prohibiting garnishment of economic impact funds, such as for federal garnishment orders (CARES Act), certain federal benefits payments, certain unemployment benefits (state law), and student loan debt (CARES Act). Absent additional guidance or clarification from the U.S. Department of Treasury, Economic Impact payments may otherwise be garnished in accordance with garnishment orders currently in force. For example, payments may be garnished to provide child support pursuant to a court order. COVID-19 related developments continue to evolve. We recommend that you monitor the U.S. Treasury Department’s website in the event it issues any new information addressing garnishment protections regarding economic impact payments. Some states and local jurisdictions have suspended enforcement of certain garnishment orders, and banks are encouraged to monitor developments from local and state jurisdictions.
22. [04/23/2020] Deposits into Closed Accounts. What should a financial institution do if an Economic Impact payment is direct deposited to an account that is closed? The payment must be returned. The Green Book, issued by the U.S. Department of Treasury’s Bureau of Fiscal Service, is a comprehensive guide for financial institutions that receive ACH payments from and send payments (i.e. collections) to the federal government. As the National Automated Clearing House Association (NACHA) notes in its “ACH Network Rules Pandemic-Related Frequently Asked Questions” (Updated April 16, 2020), according to the Green Book (page 4-2), if a U.S. Treasury payment is made to a closed account, the receiving depository financial institution (RDFI) should return the payment. The Green Book states in Chapter 4 that all ACH payments must be returned in accordance with the NACHA Operating Rules and Guidelines, including when an account is closed or does not exist. Most ACH returns to the IRS will result in a paper check being issued; therefore, RDFIs must make appropriate use of Return Reason Codes.
23. [04/23/2020] Payment to the Deceased. What should a financial institution do if an Economic Impact payment is direct deposited to an account whose owner is deceased? The Green Book, issued by the U.S. Department of Treasury’s Bureau of Fiscal Service, is a comprehensive guide for financial institutions that receive ACH payments from and send payments (i.e. collections) to the federal government. According to the Green Book (page 4-2), a financial institution must return all ACH payments if the financial institution receives the payment after having knowledge of the death of a recipient. The financial institution should also refer to the National Automated Clearing House Association guidelines, in addition to referring to state law regarding decedent funds. COVID-19 related developments continue to evolve. We recommend that you monitor the U.S. Treasury Department’s website and NACHA website.
24. [04/23/2020] Fraudulent Economic Impact Checks. We are worried about individuals presenting fraudulent IRS economic impact checks. What can a bank do to reduce the risk of accepting a fraudulent paper check? 13 The United States Treasury Department has informed us that economic impact checks will look similar to IRS tax refund checks. They can be verified using the Treasury Check Verification Application (
https://tcva.fiscal.treasury.gov/approot/tcva/TCVA
Welcome.html), provided that the financial institution has a valid routing transit number, check number and check amount. This site also provides a description of Treasury Check Security Features. Financial institutions should be alert to increased attempts of fraud. Federal law enforcement agencies are observing a rise in economic relief fraud and expect the fraud attempts to continue throughout the pandemic.
25. [04/23/2020] Accounts for Unbanked Consumers. Can banks open accounts for unbanked consumers to receive economic relief payments? Yes. The FDIC is supportive of efforts to bring unbanked consumers into the banking system, and encourages financial institutions to consider opening such accounts so that these consumers can receive their economic impact payments safely and quickly. Financial institutions should take a risk-based approach in assessing individual customer relationships. There is significant flexibility built into the existing rules. The customer identification program (CIP) rule17 asks for the collection of name, address, date of birth and a taxpayer identification number when an account relationship is established. This information enables a bank to form a reasonable belief that it knows the true identity of each customer wanting to establish an account relationship. Under the CIP rule, a bank must have risk-based procedures for verifying a customer’s identity. Banks may use various methods to verify a customer’s identity including verification through information such as a utility bill or public databases. 17 31 CFR 1010.220. 14
