top of page
  • Writer's pictureC.G. Perry

Ethical Case: Stimulus Checks and Overdraft Protection

Updated: May 10

Original Photo by Edwin Hooper on Unsplash

The outbreak of the COVID-19 pandemic required Americans to shelter-in-place, causing the U.S. economy to freeze-up and instigating a national unemployment crisis affecting millions of Americans. The U.S. Congress passed legislation in an attempt to limit adverse economic impacts, including a stimulus package granting 1,200US Dollars (USD) to single tax filers with annual incomes of 75,000 USD or less and 2,400USD to married couples with annual incomes of 150,000USD or less. The purpose of the payment was to serve as relief for persons in need of emergency funds. Additionally included was the CARES Act which provided the Paycheck Protection Program (PPP). The PPP was administered by the Small Business Administration (SBA) and was intended to support small businesses by providing forgivable government loans if used to pay employees’ compensation, mortgages, rent, and utilities. According to the SBA website, "[t]he Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.”

USAA is a member-owned organization which provides insurance and financial services exclusively to current and former members of the military and their family members. USAA has an excellent reputation as a well-run organization and for giving its members excellent service. Many USAA members maintain checking accounts and some of those members with checking accounts overdrew their balances during the 2020 pandemic and incurred a negative balance. When the 1,200USD or 2,400USD stimulus check was deposited, USAA used those amounts to offset the negative balances in some of its members’ accounts. Members were not informed in advance of this action. This resulted in some USAA members not having any access to the stimulus money sent to them from the U.S. Congress.

The action USAA took in crediting the funds to existing account deficits was perfectly legal, although it raises ethical issues regarding corporate moral agency and corporate governance. Let’s consider the implications on the stakeholders from Kantian and Utilitarian viewpoints, respectively.

Know Your Rights

Original Photo by Mick Haupt on Unsplash

Before continuing further there are some key terms that must be explained: Positive rights and negative rights. Negative rights are fundamental rights which are based on the inaction of other entities. For example, the right to free speech requires that no entity acts to silence the speech of another. The required inaction of silencing another. The right to life requires that no entity harms another. The required inaction of harming another. By contrast, positive rights are more akin to extensions of negative rights. For example, the right to free speech supports any entity's defense against acts to silence speech. The right to life requires bystanders to take action by rendering aid to protect life.

The Ethical Issues

Original Photo by Alex Block on Unsplash

USAA partially infringed upon its members’ negative right to stimulus funds when it deducted a portion from the federally deposited funds, intended to assist members, to offset the overdraft protection debt owed on the respective checking accounts held by said members.

Stakeholder Implications

The stakeholders in this scenario include USAA, the association itself; the partners of the association; members of the association with the checking accounts; members with checking accounts whose stimulus check was deducted; and the observant public (including those considering USAA membership for themselves). USAA, a registered association with fewer means to generate income, acted in the interests of all stakeholders by exercising its right to preserve its fiscal integrity by collecting on debts owed, irrespective of the circumstances.

Kantian Viewpoint

Immanuel Kant’s deontological ethical theory claims that actions are only morally rational if they are committed out of duty. Prima facie duties are irrefutable unless conflicted with an equally significant or higher duty. In this scenario, USAA's actions are compliant with Kant's categorical imperative by acting prima facie towards all USAA members with overdrawn checking accounts regardless of the depositor. Although USAA could have foreseen the circumstances surrounding the stimulus checks and adjusted their operations to prevent this action, a financial institution, by any definition, should expect its debts to be paid. Such an expectation is replicable and is USAA’s fundamental duty to all its stakeholders. USAA is a financial institution. USAA members knew that when they signed up, therefore it is rational to expect a financial institution to perform like a financial institution.

Utilitarian Viewpoint

Utilitarian Jeremy Bentham would opine that USAA deducted from its members relief (and happiness) by deducting from their federal aid. The affected USAA members’ fiscal distress is made evident by the overdraft debt on their checking accounts. USAA would have acted morally if it delayed or reserved its positive right to those deposits until after the affected members were in a better fiscal situation. Therefore, it is also rational to assume that the affected USAA members needed that money more than USAA at that time.

Recommended Actions

USAA’s operations comply more with Edward Freeman’s Stakeholder theory: all whose lives and livelihood are affected by a corporation bear a right and obligation to participate in directing it. Therefore, it may intend to credit the accounts affected with exact amounts deducted or form its own fund in response to its members’ financial need. Additionally, USAA may consider every eligible Service Member in the US military as a theoretical stakeholder to the association’s brand because a brand is an intangible asset.


Original Photo by Louis Velazquez on Unsplash

Kant's goodwill is unquestioningly "good", however moral rationale is non prima facie; thus requiring context. Joseph Heath’s perspective opines state preference for market-based economies because of their efficiency, however states must be equally efficient in correcting market failures through adequate legislation. Businesses seek profit and may feel they have a positive right to exploit legislation when opportunities arise. Despite the proof of a positive correlation between a company's reputation and its financial performance, a "patriotic association" is still a financial institution. Assuming a company, such as USAA, possesses moral agency does not alter their inclination to pursue their own interests nor should they be blamed for doing so – especially if such pursuits are wholly legal. Incorporated individuals enjoy more privileges than private citizens, such as limited liability protection. Therefore, states and the U.S. Congress may legitimately impose greater obligations upon them in return for the privileges granted. Whether these governing entities do so or not is up to the constituents.

About the Author

Chris Perry writes and manages The Grey Point View since its inception in 2021. is an independent blog on ethics, politics, Euro-life and more. Written by expats, global citizens and other interesting sapiens. If you are interested in writing with us, send us your post for review. We look forward to hearing from you.

The views and opinions expressed in this blog are those of the authors and do not necessarily reflect this site's official policy or position. To learn more about our policies visit

bottom of page