Banks are stepping up to meet the needs of customers who could miss their next paycheck or two due to the government shutdown.
Several banks in the Washington, D.C., region say they are urging customers affected by the shutdown to contact their local branches if they are concerned about meeting loan payments or getting socked with hefty fees for overdrawing their accounts. Some, including Capital One Financial (COF) in McLean, Va., are actively promoting assistance programs while others say they will handle situations case by case.
"We will do whatever we can to ease pain for anyone who is furloughed," says Bernard Clineburg, chairman and chief executive at the Cardinal Financial (CFNL) in McLean, Va. "If this goes on for any length of time, we will be flexible on payments. Every bank should do that."
More than 800,000 federal workers were furloughed on Tuesday after lawmakers failed to agree on a deal to fund the government. Republicans and Democrats remain at an impasse and on Wednesday many political observers were predicting that the deadlock could last at least the Oct. 17 deadline for raising the nation's debt limit. The last government shutdown in 1996 went on for 28 days.
About two weeks ago, lenders at Eagle Bancorp in Bethesda, Md., began calling customers, such as government contractors and developers, who might be affected by a shutdown to see what they needed, says Ronald Paul, the company's chairman and chief executive. The $3.4 billion-asset company's employees were given flexibility in working out accommodations for each borrower, he adds.
Some customers requested advances on lines of credit while others asked to pay only interest, and not the principal, on loans. Eagle's response is similar to what it did in 2002 when sniper attacks terrorized the Washington area and temporarily shuttered businesses, Paul says.
"We have an unwritten policy that employees must bring a clean slate into meetings with customers," Paul says. "You have to listen to customers as every case is different. Our whole mantra has always been flexibility."
The $2.9 billion-asset Cardinal began discussing last week how a shutdown would affect its customers and the bank itself. Clineburg says that a significant portion of the bank's homebuyers are federal employees and executives were concerned that the bank might be unable to sell recently closed mortgages if the borrower is a furloughed government employee who is suddenly not receiving a paycheck.
Fannie Mae issued temporary guidance on the issue Tuesday, saying that it would still buy loans made to government employees affected by the shutdown. Fannie is also encouraging servicers to offer unemployment forbearance and said they must waive late payment charges.
Clineburg says Cardinal has more flexibility to work with customers whose loans it keeps in portfolio. If the shutdown lasts for an extended period of time, it would also consider offering temporary lines of credit to customers who are running short of cash, he adds.
Capital One Financial (COF) has programs in place to help customers who are facing a sudden loss of income. The company used a message on its homepage to encourage those affected by the shutdown to contact the company if they needed help. The hardship program includes eliminating penalties for early withdrawals of certificates of deposit and waiving overdraft charges and fees for late payments on automobile, home and business loans and credit cards.
Capital One may add other options depending on how long employees are furloughed, says Pam Girardo, a company spokeswoman.
Other banks with a significant presence in the Washington area, including Bank of America (BAC), SunTrust Banks (STI), PNC Financial Services Group (PNC), said that they would work with customers on an individual basis.
"While we aren't offering a universal program at this time, we encourage any of our customers with an issue or concern to contact us and we will work directly with them to address it," a spokeswoman at PNC Financial Services Group said in a statement.
While the shutdown will hit the Washington region hardest, other areas of the country will be affected by it. The $5.9 billion-asset Cadence Bank, a unit of Cadence Bancorp (CADE), said in a news release that it will allow eligible customers to skip their October loan payments and will waive any late fees. Customers of the Birmingham bank must to provide a copy of their government identification in order to receive a one-month extension.
At this point, banks are on their own to design their own assistance programs. The Consumer Financial Protection Bureau, the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. all said Tuesday that they were not planning to issue guidance to banks on how they should work with affected customers.
At least half a dozen credit unions had already implemented plans to help their members and more were expected to make them public soon, says Paul Gentile, executive vice president of strategic communications and engagement at the Credit Union National Association. He says credit unions were offering things like interest-free short-term loans and letting customers skip a payment on a consumer loan at no charge.
"From a member services standpoint, there is no better time to show your value than in times of need," Gentile says.
Andy Peters and Maria Aspan contributed to this article.