Today, the House of Representatives passed Congresswoman Jennifer Wexton’s (D-VA) Shutdown Guidance for Financial Institutions Act. The bill would require federal regulators to issue regulatory guidance for financial institutions within 24-hours of a government shutdown. The guidance would encourage lenders to work with borrowers affected by a shutdown and is necessary to help protect consumers and small businesses from some of the financial hardships that accompany a missed paycheck.
This legislation was drafted by the Congresswoman in response to correspondence from a furloughed federal employee whose mortgage application was nearly denied because her mortgage lender wrongly considered her unemployed and too much of a risk to finance.
“Missing a paycheck is a hardship for many families, but missing two can be devastating. And that’s exactly what too many of my constituents were forced to endure during the last government shutdown. These financial difficulties also place unique pressure on our national security community, whose security clearances are jeopardized by damaged credit scores,” said Congresswoman Jennifer Wexton. “Despite repeated government shutdowns, our federal workers have shown a steadfast commitment to serving the American public and they deserve to be treated with respect. With just a few legislative days left for Congress to take action before yet another government shutdown, this bill helps ensure that our federal workers and contractors are not punished for a shutdown they didn’t cause.”
Despite not receiving a paycheck during a government shutdown, federal employees and contractors must still make payments on debts such as loans, mortgages, and credit cards. While some lenders and credit unions offer flexible payment options and no-interest loans for affected consumers during these periods, the absence of timely federal guidance often leads to confusion and difficulty and an additional financial burden on federal employees and federal contractors.
Under Wexton’s bill, federal financial regulators will, in consultation with state banking regulations and other appropriate federal and state agencies, issue shutdown guidance to financial institutions encouraging them to work with consumers and businesses.
During the shutdown that lasted from December 2018 to January of this year, financial regulators did not issue guidance encouraging banks to work with borrowers affected by the shutdown until 20 days after the shutdown had begun. During the shutdown in 2013, it was not until the 9th day that guidance was issued. The Shutdown Guidance for Financial Institutions Act would require guidance to be issued within 24 hours of the start of a shutdown.
The bill also mandates a report to Congress within 90 days of the end of a shutdown to evaluate the effectiveness of the guidance issued and a review of what steps financial institutions took in response to the guidance.
Congresswoman Wexton was sworn into office under the longest government shutdown in history, which affected tens of thousands of Wexton’s constituents and many local businesses in Virginia’s 10th Congressional District. Wexton actively fought to bring an end to the shutdown, to secure back pay for federal workers who went over a month without a paycheck, and to uplift stories of constituents facing financial hardship.
The full text of the Shutdown Guidance for Financial Institutions Act is available here.