VBA Update on COVID-19 Economic Relief Bill
January 5, 2021

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Thank you for joining us this morning for our meeting with ABA’s James Ballentine and Dan Martini. The recording of that meeting is now available here.

We had the following question come in that we wanted to share with the larger group:

Question: Can a bank offset debts owed by an account holder to the bank with funds from the Economic Impact Payments?

Answer: Likely no.  While there is no specific prohibition in federal law regarding offsetting the Economic Impact Payments (EIPs) for negative bank balances, Virginia law may prohibit it.  The Virginia General Assembly passed HB 5068 during its Special Session in 2020 and the bill was enacted into law October 28, 2020.  The newly added § 34-28.3 B of the Code of Virginia provides that “[a]ll emergency relief payments paid to individuals shall be automatically exempt from the creditor process”.  These latest EIPs fall within the definition of “emergency relief payment” and the “creditor process” includes all methods used by creditors to collect unsecured debts.  A bank that offsets an amount owed could be interpreted as a creditor collecting an unsecured debt.  Further, § 34-28.3 B of the Code specifically identifies levies or garnishments for child support, spousal support, or criminal restitution orders as the only ones allowed upon an emergency relief payment.  Thus, a bank that offsets or collects an account holder’s debt to the bank out of emergency relief payment funds may be in violation of § 34-28.3 of the Code.  It is also important to note that EIPs are exempt from federal garnishments and that several banks received negative media attention during the first round of EIPs for offsetting outstanding fees.

We will continue to keep you updated as more information becomes available. Meanwhile, please reach out to Bruce Whitehurst with any questions you may have.