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While the details of a second incentive package are not yet certain, it is likely that Americans will eventually receive another round of direct payments.
Although Congress has left the Capitol for its annual summer break after an incentive package negotiations broke down, President Trump today tweeted that he has focused the Treasury Secretary on preparing to send incentive checks of up to $ 3,400 to a family of four.
Both key pieces of previously proposed legislation on the table provide a similar payoff to the provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that authorized $ 1,200 payments this spring.
But there is some concern about how quickly another round of incentive payments could be delivered to troubled Americans. Accelerating the payment system depends on the method that legislators select, and how fast they act.
CARES Act Stimulus Payments: What Went Wrong
As of June 3, the U.S. Treasury, in coordination with the IRS, had provided $ 159 million in economic impact payments to eligible individuals; an estimated 30 to 35 million payments remained for mail delivery by paper check.
But while many people saw their payment arrive via direct deposit, this was not the case for everyone.
Some people received notification that their payment went to an old bank account as a previous address.
Some completed payments were made to deceased Americans. A GAO report found that some 365,000 low-income Americans did not receive the $ 500 per child payment they expected to receive with their one-time $ 1,200 payment per adult.
And some people who got prepaid debit cards that contained their payment instead of the checks they expected accidentally threw away their payments.
Two primary options have been discussed by lawmakers, but would require swift action to make a difference for a second round of incentive checks.
Real-time payments would provide a quick fix
One measure that measures the amount of time it takes people to access their incentive payments can be implemented by the Federal Reserve. It’s just a matter of reducing the time it takes for a government check to clear.
As Brookings Economic Studies Fellow Aaron Klein stated in a July op-ed, the Expedited Funds Availability Act of 1987 specifies that checks from the Treasury Department must be available for withdrawal from the recipient’s bank to the actual recipient ‘no later than the working day after the working day ”on which the funds are distributed.
In theory, this is no more than two business days. But the rule does not apply to holidays or weekends, which can extend this waiting period to an additional three to five days.
Someone waiting for access to their annual tax return, for example, might find this an inconvenience, but not quite an obstacle. But in the case of stimulus payments, it could put a huge delay on funds that are seen by many as a lifeline for outside work and otherwise struggling Americans during the pandemic.
Some banks gave people early access to their incentive checks, instead of waiting until the next business day. “After all, a Treasury check will not bounce,” Klein wrote. But that was not the case.
“Change this one line [of the law] to ‘immediately’ save people millions in bank overdrafts, controlling fees, late payments, unnecessary loans on paid days and numerous other difficulties and fears, ‘Klein argued.
The Fed has the authority to make the change. But some lawmakers have also urged Congress to authorize an update of the rule. The Payment Modernization Act of 2019, introduced last July by Sens. Chris Van Hollen (D-MA) and Elizabeth Warren (D-MA) alongside reps. Ayanna Pressley (D-MA) and Jesús “Chuy” García (D-IL), aim to update the Federal Reserve’s operations to create a national real-time payment system.
In addition, in August 2019, the Federal Reserve introduced its proposal for FedNow, a real-time payment system. But a September hearing in the Second Chamber Committee on Financial Services proves that support for these measures is not universal. A real-time payment system run by the federal government could put competition at the banking center, opponents have claimed.
‘FedAccounts’ could provide long term help to unbanked
Meanwhile, there is ongoing discussion about the possibility of plunging the Federal Reserve even further into the banking scene, by launching digital accounts to get recipients money faster.
In March 2020, prior to the passage of the CARES Act, rep. Maxine Waters (D-CA) legislation that would create digital payment accounts for people without bank accounts. These digital accounts, called “FedAccounts”, would be maintained by Federal Reserve banks and charged zero fees to participants. The move would make it easier for underbanked and unbanked people to access their financial compensation payments without having to pay check-cashing or other access fees.
But setting up the FedAccounts system, complete with debit cards and online banking services, would take a lot of time and support. Plus, it would require coordination with the United States Postal Service – the bill that would provide banking services and access to ATMs for participants with limited access to Federal Reserve Bank branches.
The House Finance Committee’s Financial Technology Task Force has hosted a hearing on the potential for FedAccounts to accelerate stimulus payments in July.
“We have the technology. There are a few things around the edges that we could do, ‘said Professor Mehrsa Baradaran of the University of California Irvine School of Law during that hearing. “We would need ATMs at certain post offices. We would need the Fed for real-time payments. But Baradaran called those items “well within our technological capacity.”
How can you now prepare for your next incentive scheme?
It has taken about three weeks for the previous incentive payments to begin arriving by direct deposit, so you can expect a similar wait when and if a second round of payments is authorized. And when your check arrives, you can still expect to wait a few days to access the funds, as it is unlikely that major changes will take place immediately.
If there is a relief package listed in the law, you will want to visit the IRS Get My Payment portal for instructions. Since the U.S. Treasury and the IRS have partnered this spring to spread payments, the portal will be the best place to get information about your eligibility for payment.
During the CARES Act’s payment review, you could add direct debit information through the portal, but you could not make any changes to this information or update your postal address unless your payment could not be delivered and was returned to the IRS. It is unclear at this point whether that system will be updated to provide more flexibility for eligible recipients.
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