As the partial government shutdown stretches into a second week, banks are making plans for how they'll deal with waves of federal workers and others forced into economic hardship.
They're prepared to waive late fees and overdraft fees, renegotiate payment amounts and schedules and, in some cases, extend emergency loans to those in financial distress. Bankers say the government shutdown is a reminder that banks are typically willing to work with customers facing money troubles, whether those result from layoffs, personal hardships, natural disasters or government furloughs.
"Banks all around the country have a long record of reaching out and making accommodations in times of financial difficulties," said Bruce Whitehurst, president and chief executive of the Virginia Bankers Association. "There are a lot of things banks can and will do to help people caught in unfortunate situations."
With Congress unable to agree on measures to fund many federal operations, the government furloughed an estimated 800,000 federal workers without pay last week, although tens of thousands of those are civilian Defense Department employees who the government said over the weekend would be recalled.
In previous shutdowns, furloughed workers have been paid retroactively, although that's not certain this time. Real economic hardships could start Oct. 11, the next scheduled federal payday.
Individual help offered
Most large banks have special teams in place that specialize in helping customers in need, and they say they consider each case individually.
Capital One, for instance, placed a note on its website encouraging customers affected by the shutdown to contact the bank if they required assistance: "We have programs in place to help all customers experiencing financial difficulties due to hardship situations, to include sudden loss of income." Bank of American spokeswoman Anne Pace said each customer's situation is different, but that the bank is "prepared to help any customer facing financial difficulties as a result of the shutdown."
Although banks often don't advertise the fact, they can also help individual customers experiencing financial burdens through credit card hardship programs .
Some smaller banks and credit unions have announced blanket policies designed to help affected federal workers. For example:
- Birmingham, Ala.-based Cadence Bank, with more than 100 branches in the Southeast, offered furloughed federal workers a one-month extension on loan payments and said it would waive associated fees.
- Andrews Federal Credit Union in Suitland, Md., is offering bridge loans of up to $5,000 to qualified members. The loans are interest-free for 90 days. After that, usual interest rates apply.
- Hanscom Federal Credit Union in Massachusetts is offering federal employees up to a $5,000 line of credit to be extended if their checking accounts become overdrawn. The credit line is interest-free for 60 days. The credit union is also waiving penalty fees for withdrawals from certificates of deposit.
- TD Bank of Cherry Hill, N.J., said government employees affected by the shutdown can draw on an extra $1,000 at no charge. It said it would also waive late fees on bank credit cards and offer mortgage assistance.
Leaders of credit unions say they're quick to offer such assistance because they are in touch with the needs of their members, many of whom are government employees who have been furloughed before.
"You'll find that credit unions are much more organized and much more responsive when it comes to something like this because of their experiences with it," said Paul Gentile, executive vice president of Credit Union National Association, a trade association of credit unions.
Advice for furloughed workers
If you're experiencing a financial hardship and need assistance from your bank or credit union, experts offer these tips:
- Communicate early. It helps if you can talk to your financial institution when you start to see financial storms brewing. If you wait too long, it can be more difficult to get the flexibility you need, Whitehurst says. "Before missing a payment, talk to someone," he advises.
- Understand your finances. In conversations with your bank, it helps to have a full picture of your income and expenses, so you know how much you can realistically afford to pay toward your bills. The National Foundation for Credit Counseling has a number of free tools on its website that can help in short- and long-term financial planning. "No one has ever regretted being financially prepared, and preparation starts with understanding where you stand today," said NFCC spokeswoman Gail Cunningham.
- Be realistic. Banks probably aren't going to forgive your debt. You will still owe money you have borrowed. They're more likely to restructure it over a longer period of time by reducing your monthly payments or letting you skip a payment. Be sure to ask how these steps might affect your credit score.
See related: 6 ways to protect your credit after a disaster