By Donya Parrish, MCU VP- Risk Management
In an April 6 Ask the Fed webinar, officials from Treasury, Fiscal Services, and FRB Cash Services discussed the upcoming Economic Impact Payments (EIP). They shared that the primary goal is getting funds to consumers as quickly as possible and it could present some operational challenges. Credit unions are encouraged to be prepared and know that additional communications are planned as soon as more details are known.
Timing of Payments
Payments began the week of April 13 to those who filed and received 2019 tax refunds. All ACH and check payments appear in the same manner as tax refunds so educating staff on Treasury check security features is important and use of the Treasury Check verification system is encouraged.
The Federal Reserve knows cash demand will be high in the coming weeks and feels confident they have the supply to meet it. Communication with your cash ordering source on amounts you may need in coming weeks is encouraged. They also recommend planning to credential a backup employee for ordering in case your primary becomes ill or is unavailable due to quarantine.
CUNA’s Compliance team released a helpful FAQ document on April 16. Find it here. The Montana Division of Banking also released a Cheat Sheet on April 20 to assist with payment and account questions related to these payments.
Q: What do we do with stimulus ACH payments that come into closed accounts? Do we have to reopen the account?
A: On the call, Treasury and the Fed both suggested that your credit union decide how you will handle those types of payments and be consistent with it. If you return a payment (as you can), that consumer will receive a check a few weeks later. It is similar to a tax return process, so you may want to look at your procedures there. Again, the payments will not be perfect since they are working to push them out as quickly as possible.
Q: Is the credit union allowed to offset these payments to satisfy past due loan payments and other negative balance obligations?
A: While these payments are not statutorily exempt from garnishment, the goal of the payments is to assist consumers in a difficult financial time. Your credit union may want to be cautious and weigh the reputation risk you could incur if you choose to offset or garnish them.
Q: Can a consumer check their payment status with the IRS?
A: Yes! The Get My Payment application went live on April 15. It allows a consumer to check their payment status, confirm their payment type, and update their account information with the IRS.
Q: How do we handle ACH payments coming into an account for a deceased member?
A: It may depend on whether the payment comes into a single account or a joint account. For single accounts in the name of a deceased member, you can return the payment if you are aware it is for a decedent, or if the account is closed. If it is posting to an account that is owned by the surviving spouse (seems to be more common), the credit union can allow it to post and educate the member that they may be liable to return half of the payment to Treasury when they become aware of the death. It is unclear what the credit union liability is here, so if you choose to return the payment, that is an option and the surviving joint owner will likely receive a check in a few weeks.
On May 6, the IRS added FAQ to provide guidance that payments to deceased individuals should not have been made. The guidance (at #10 and #41 here) directs individuals (note: it was not written to credit unions, so question do remain about your role in the return.) how to return funds that were made to deceased individuals.