As Federal Shutdown Continues, Financial Regulators Seek to Address Related Impacts

With no immediate end in sight to the current federal shutdown, financial regulators are seeking to minimize the adverse impacts of the shutdown on individuals. In a January 11, 2019, press release, the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and other regulators issued a joint press release wherein the agencies acknowledged that “affected borrowers may face a temporary hardship in making payments on debts such as mortgages, student loans, car loans, business loans, or credit cards.” While the agencies suggested that these effects “should be temporary,” they “encourage[d]” the regulatory community to “consider prudent efforts to modify terms on existing loans or extend new credit to help affected borrowers.” The agencies specifically opined that “[p]rudent workout arrangements that are consistent with safe-and-sound lending practices are generally in the long-term best interest of the financial institution, the borrower, and the economy.” Perhaps most importantly, the agencies offered an olive branch to a regulated community that might be reticent to take the agencies’ advice and pursue strategies to address borrower issues and financial exigencies caused by the shutdown: “Such efforts should not be subject to examiner criticism.” As the shutdown continues, regulators and Congress may continue to intervene in the ordinary operations of the financial system to assist impacted employees and families who find themselves facing unexpected financial difficulties. Additionally, the financial services industry should consider developing standardized processes and strategies to address shutdown-related hardship requests submitted by borrowers and also monitor closely legislative and regulatory activities to see what additional measures may be considered as the shutdown remains in place.