This Banking Change Could Deliver Your Second Stimulus Check Faster

While the details of a second stimulus package are still uncertain, it’s likely that Americans eventually will get another round of direct payments.

Both major pieces of proposed legislation on the table provide a similar payout to the Coronavirus Aid, Relief, and Economic Security (CARES) Act provision that authorized $1,200 payments this spring.

But there’s some concern about how fast those stimulus payments could be delivered to struggling Americans. Accelerating the payment system depends on the method lawmakers select, and how quickly they act.

As of June 3, the U.S. Treasury, in coordination with the IRS, had delivered 159 million economic impact payments to eligible individuals; an estimated 30 to 35 million payments remained for mailed delivery by paper check.

But while many people saw their payment arrive quickly by direct deposit, that wasn’t the case for everyone.

Some people received notification that their payment went to an old bank account or a former address.

Some completed payments were made to deceased Americans. A GAO report found that about 365,000 low-income Americans did not receive the $500-per-child payment they were expecting to receive with their one-time $1,200 payment per adult.

And some people who received prepaid debit cards containing their payment instead of the checks they expected threw away their payments by mistake.

Two primary options have been discussed by lawmakers, but would require quick action to make a difference for a second round of stimulus checks.

One measure that could reduce the amount of time it takes for people to access their stimulus payments could be implemented by the Federal Reserve. It’s simply a matter of reducing the amount of time it takes for a check from the government to clear.

As Brookings Economic Studies Fellow Aaron Klein explained 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 “not later than the business day after the business day” on which the funds are deposited.

In theory, that’s no more than two business days. But the rule doesn’t account for holidays or weekends, which can extend that waiting period to for an additional three to five days.

Someone waiting to access their annual tax return, for example, might find this to be an inconvenience, but not a huge obstacle. But in the case of stimulus payments, it can put a major delay on funds that are seen by many as a lifeline for out-of-work and otherwise struggling Americans during the pandemic.

Some banks gave people early access to their stimulus checks, instead of waiting until the next business day. “After all, a Treasury check is not going to bounce,” Klein wrote. But that wasn’t the case across the board.

“Changing this one line [of the law] to ‘immediately’ would save people millions in bank overdrafts, check cashing fees, late fees, unnecessary payday loans, and countless other hardships and anxieties,” Klein argued.

The Fed has the authority to make the change. But some legislators have also urged Congress to authorize an update to 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), aims to update the Federal Reserve operations to create a national real-time payment system.

In addition, the Federal Reserve introduced in August 2019 its proposal for FedNow, a real-time payment system. But a September hearing in the House Committee on Financial Services demonstrated that support of these measures isn’t universal. A real-time payment system run by the federal government could stanch competition in the banking scene, opponents have claimed.

Meanwhile, there is ongoing discussion about the possibility of having the Federal Reserve dive into the banking scene even further, by launching digital accounts to get funds to recipients more quickly.

In March 2020, in advance of the passage of the CARES Act, Rep. Maxine Waters (D-CA) introduced 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 charge zero fees for participants. The move would make it easier for underbanked and unbanked people to access their economic relief payments without having to pay check-cashing or other access fees.

But establishing the FedAccounts system, complete with debit cards and online banking services, would take considerable time and support. Plus, it would require coordination with the United States Postal Service—the bill specifies would provide banking services and access to ATMs for participants with limited access to Federal Reserve Bank branches.

The financial technology task force of the House Committee on Financial Services 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,” Professor Mehrsa Baradaran of University of California Irvine School of Law said during that hearing. “We would need ATMs at certain post offices. We would need the Fed to do real-time payments.” But Baradaran called those items “well within our technological capacity.”

How to Prepare Now for Your Next Stimulus Check

It took about three weeks for the previous stimulus payments to start 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 be able to access the funds, since it’s unlikely significant changes will be put into place immediately.

If a relief package is signed into law, you’ll want to watch the IRS Get My Payment portal for instructions. Since the U.S. Treasury and the IRS worked together to disseminate payments this spring, the portal will be the best place to get information about your payment eligibility.

During the rollout of CARES Act payments, you could add direct deposit information via the portal, but you couldn’t make changes to that information or update your mailing address unless your payment couldn’t be delivered and was returned to the IRS. It’s unclear at this point whether that system will be updated to provide greater flexibility for eligible recipients.