In its continuing efforts to assist credit unions in navigating the 2019 novel coronavirus, New York Credit Union Association staff has been providing answers to a range of compliance questions that member credit unions have had amid the virus.

Sarah Hodgens, the Association’s director of compliance, has compiled a list of the top five recurring questions that credit unions have been contacting the Association’s compliance department about, as well as the corresponding answers.

Delinquent or charged-off debts
Q: Can we offset delinquent or charged-off debts with a member’s stimulus deposit?

A: The CARES Act does not directly address the question of whether stimulus money is exempt from levy or garnishment, including offset. However, April 17, 2020 New York State’s Attorney General published guidance that exempts CARES Act payments from garnishment under New York State law, which prohibits offset using these funds.

Closed accounts
Q: If a stimulus deposit is being presented on a closed account, can the credit union reopen the account?

A: If a member’s account has been closed, the credit union should return the payment. Reopening a closed account to avoid returning a payment could create liability for the credit union.

If an account is being reopened, the credit union should obtain express written consent from the member, along with an updated account signature card. If their membership was closed, the person must requalify for membership, reestablish par value, and meet the identification requirements of the credit union’s Member Identification Program.

Re-routing payments
Q: If a member has a closed account, can a stimulus payment be re-routed to another account they hold at the credit union?

A: Deposits should not be rerouted to another account the member holds at the credit union. NACHA rules require the credit union to verify the account number the deposit is being credited to matches the account number sent with the transaction. If the account number does not match, the transaction should be returned. The member would need to provide updated deposit information with the IRS.

Deceased members
Q: Should the credit union return direct deposits of stimulus checks in the name of a deceased member and can they be reclaimed at a later date by the government agency?

A: The credit union is not responsible for determining eligibility of these funds. NACHA rules require the credit union to verify the account number the deposit is being credited to matches the account number sent with the transaction. If the account number matches, the deposit can be credited to the account. If the credit union’s policy requires transactions solely in the name of a deceased individual be returned, the credit union can follow their policy and return the item. If returned, the decedent’s survivors or estate can contact the IRS to determine eligibility and provide correct account information for the deposit.

Additionally, per the Green Book only government benefit payments are subject to reclamation. The economic impact payments are not subject to reclamation. Adjustments are made between the authorizing federal agency and the recipient’s survivors or estate.

Paper checks
Q: How should paper checks be endorsed and negotiated if the payee is deceased?

A: When negotiating paper checks, failure to obtain a proper endorsement results in a breach of the presentment warranties and the Treasury may reclaim the check, leaving the credit union liable for the amount.

If an administrator or executor has been appointed, they may endorse the check on behalf of the deceased member. The endorsement must indicate their capacity to endorse the check. E.g., “John Jones by Mary Jones, executor of the estate of John Jones.”

The check should not be negotiated through the executor or administrator’s’ personal account. Rather, items in the name of a deceased person are recommended to be negotiated through an estate account.