EIP RIsk Management

Signed in March 2020, the CARES Act provides Economic Impact Payments (EIPs) to qualified consumers. The government is disbursing EIPs to people based on information contained within their 2018 or 2019 federal tax returns. Both electronic and physical EIPs will be distributed in weekly cycles. As these stimulus funds begin to be distributed to individuals, certain questions and risks have arisen that financial institutions need to consider.

Operational Risks – Your institution has standard policies and procedures on processing ACH payments and specifically, tax refunds. These payments should follow these standard procedures with particular attention paid to unique situations with the goal of providing EIPs to consumers.

Closed Accounts – Some entries may reject if the account is closed. Your institution should consider if you have the ability to identify if the closed account is for an accountholder who opened a different account, or has left the institution. It may be difficult to explain to a current accountholder that the payment was received and returned. Accounts for existing customers may have changed for any number of reasons, including internal changes made to the core since the person filed either his or her 2018 or 2019 tax returns. Changes related to your core system that caused them not to get paid would be even more difficult to explain.   As mentioned above, any returned EIP will be redistributed via check.

Deceased Account holders – These payments should be handled in your institution’s usual manner. EIPs are NOT subject to reclamation, so the institution would not be liable to Treasury for the reclamation of these payments.

Handling Economic Impact Payment Challenges
Signed in March 2020, the CARES Act provides Economic Impact Payments (EIPs) to qualified consumers. The government is disbursing EIPs to people based on information contained within their 2018 or 2019 federal tax returns. Both electronic and physical EIPs will be distributed in weekly cycles. As these stimulus funds begin to be distributed to individuals, certain questions and risks have arisen that financial institutions need to consider.
Operational Risks – Your institution has standard policies and procedures on processing ACH payments and specifically, tax refunds. These payments should follow these standard procedures with particular attention paid to unique situations with the goal of providing EIPs to consumers.
Closed Accounts – Some entries may reject if the account is closed. Your institution should consider if you have the ability to identify if the closed account is for an accountholder who opened a different account, or has left the institution. It may be difficult to explain to a current accountholder that the payment was received and returned. Accounts for existing customers may have changed for any number of reasons, including internal changes made to the core since the person filed either his or her 2018 or 2019 tax returns. Changes related to your core system that caused them not to get paid would be even more difficult to explain.   As mentioned above, any returned EIP will be redistributed via check.
Deceased Account holders – These payments should be handled in your institution’s usual manner. EIPs are NOT subject to reclamation, so the institution would not be liable to Treasury for the reclamation of these payments.