On Friday, the Consumer Financial Protection Bureau (CFPB) issued a joint press release with several other regulators urging financial institutions to work with borrowers affected by the government shutdown.
The press release notes that the shutdown should be temporary. However, borrowers impacted “may face a temporary hardship in making payments on debts such as mortgages, student loans, car loans, business loans, or credit cards.” Working with such borrowers is “generally in the long-term best interest of the financial institution, the borrower, and the economy” and “should not be subject to examiner criticism.”
The shutdown, which began on December 22, 2018, is still underway, making it the longest in United States history. It has already impacted the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC), which are now only open for limited operations. Three weeks in, it appears that the shutdown may have finally reached a point of impact on financial institutions.
According to the Washington Post, Congress approved back pay to furloughed federal employees, numbering around 800,000.
Friday, the day the regulators released the above press release, was also the first missed paycheck by the furloughed employees. These furloughed employees, who might normally be able to meet their financial obligations, may not be able to do so until the shutdown is over -- whenever that may be -- and they receive their back pay. This means that the incoming numbers for financial institutions may also be somewhat impacted until the shutdown is over. The numbers will eventually right-size themselves, but companies -- especially those servicing areas with a higher density of federal employees -- should prepare for the short-term impact.