Attorney General Bonta Announces Collection Protection For New Federal Child Tax Credit Payments

California Attorney General Rob Bonta announced Tuesday that it is illegal for financial institutions, creditors, and debt collectors in California to seize federal Child Tax Credit payments for individual debt.

Announced earlier this year as part of President Joe Biden’s $1.9 Billion American Rescue Plan, the Child Tax Credit is expanded from $2,000 per child yearly to $3,000 for children and teenagers aged 6 to 17 and $3,600 per child for children under six. The Credit, which is  now fully refundable, will also give taxpayers the option to receive it through one lump payment or throughout the year in smaller payments.

Attorney General Bonta, who noted that eligible Californian families can receive between $250 and $300 per child dependent on age, stressed that debt collectors would not be able to touch the funds due to Governor Gavin Newsom’s April 2020 Executive Order N-57-20 Executive Order that ordered all federal, state, and local COVID-19 relief funds given to Californians could not be collected by any entity as long as the funds are traced back to the government agency or entity that gave the funds.

“It’s the same reason why stimulus check payments have not been touched by credit card companies or student loan companies, or other groups,” explained Los Angeles banker and financial consultant Edgar Rivas to the Globe on Tuesday. “This money is still direct relief and can’t be touched. Bonta said what he did today because there were questions as to whether this was COVID related or covered under that Executive Order, plus, many groups are national, and many states don’t have this kind of protection. He gave the equivalent of a papal bull saying to pretty much back off of them on this.”

In his announcement on Tuesday, Bonta specifically noted the COVID-19 pandemic to help further solidify the point that these funds are pandemic related.

“The pandemic has been tough on families across California,” said Bonta in a statement. “The Child Tax Credit payments should be a bright spot for our families, putting money in their pockets as the country begins our recovery. No parent should go to bed worried that these payments will be seized by some debt collector.”

The IRS is due to start making Child Tax Credit payments on July 15th. Starting in late June, the IRS will open up online portals for individuals to check if they qualify for the credits. The Child tax credit expansion is set to remain at the new payment levels through 2025.

“Not only is the Child Tax Credit good for several more years to come, but the way that it is all worded essentially means that many families will have guaranteed income that cannot be taken away for debts,” added Rivas. “Now, wages can still be garnished, and any funds not protected by Executive Order can still be taken. In fact, garnishments may now go up and debt collectors can have a few more avenues open now because of the additional funds going into bank accounts. It will look like they are making more, so they can try other things.

“I know Bonta means well with what he said, but the protection on this just opens up a few more back door ways to get money.

“There’s always a way.”