Following criticism over its handling of federal emergency payouts related to the coronavirus outbreak, the military-focused financial company USAA announced Thursday it will no longer seize customers’ checks to cover existing debts and will refund any past such actions.

The move comes after a report in the American Prospect that the insurance and banking firm was taking veterans’ and military family members’ stimulus checks — some totaling $3,000 or more — to settle existing account balances and debts. Company officials initially defended the move as permissible under federal rules.

The checks were part of a $2 trillion economic stability package passed by Congress last month designed to help families cover immediate debts and expenses related to the coronavirus outbreak, which has sickened more than 600,000 Americans and closed down numerous businesses indefinitely.

More than 22 million Americans have filed for unemployment benefits in the last month, according to the Department of Labor.

USAA’s decision to take the emergency funds drew instant criticism from veterans advocates and lawmakers. On Thursday, just a few hours after the practice was made public, the company issued a new statement saying it would pause collections on negative account balances for 90 days.

“Beginning as early as today, we will apply this policy retroactively to any member accounts with a negative balance at the time the first stimulus checks were deposited, so that members will have access to their stimulus funds,” USAA spokesperson Matthew Hartwig said in a statement to Military Times.

“This will allow members access to their full stimulus payment to help cover the costs of rent, food and other important necessities. Beginning as early as today, we will apply this policy retroactively to any member accounts with a negative balance at the time the first stimulus checks were deposited, so that members will have access to their stimulus funds.”

Several watchdog groups have warned in recent days that the emergency payouts — up to $1,200 per individual plus another $500 per dependent, based on family earnings — could be vulnerable to seizure or interference from financial institutions.

Most of the payouts delivered so far have been transmitted to the last bank account attached to individuals’ 2018 tax returns, giving those companies power over access to the money.

Hartwig noted that USAA has launched several other initiatives designed to help customers during the coronavirus pandemic, including a 20 percent credit on two months of car insurance premiums.

The firm boasts more than 13 million customers who are current and former military personnel, or their family members.

Veterans advocates hailed the company’s reversal.

“Veterans Education Success congratulates USAA on fixing this problem so quickly and on prioritizing veterans and servicemembers who are struggling during this pandemic and economic hardship," said Mike Saunders, Director of Military and Consumer Policy for the group. "We hope the entire financial industry follows their lead.”

Leo covers Congress, Veterans Affairs and the White House for Military Times. He has covered Washington, D.C. since 2004, focusing on military personnel and veterans policies. His work has earned numerous honors, including a 2009 Polk award, a 2010 National Headliner Award, the IAVA Leadership in Journalism award and the VFW News Media award.

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