Furloughed Workers Relied on Special Programs Established by Banks and Credit Unions

Inside Subprime: Jan 28, 2019

By Aubrey Stitler

During the longest partial government shutdown in U.S. history, many banks and credit unions quickly developed special programs to help furloughed workers, a move that helped thousands stay afloat.

One federal credit union offered 0% interest loans to federal workers, something that 16,000 federal workers utilized, according to the credit union’s Senior Vice President Tynika Wilson. During the program, federal workers could take out an advance on their missed paychecks in an amount between $250 and $6,000. While the program was originally intended to cover a single pay period, the credit union extended the program as the shutdown dragged on. A number of banks also stepped in to help.

One bank spokesperson said federal workers were given special offers typically kept for victims of natural disasters, including mortgage forgiveness and auto loan forgiveness. The bank also suspended late fees and overdraft penalties for furloughed workers and halted the reporting of missed payments to the credit bureaus. In addition, the bank waived credit card cash advance fees during the final weeks of the shutdown. “We wanted to make sure that our customers can get access to the cash that they need,” one bank representative told Time.

Financial institutions were not the only businesses to offer assistance. Restaurants provided free meals and phone companies waived late fees, among other special programs. But while many companies worked to lessen the financial strain on furloughed government workers, predatory businesses and scam artists sought to take advantage of those struggling to make ends meet. Virginia Attorney General Mark R. Herring warned federal workers about predatory lenders seeking to profit from unpaid workers. Herring suggested that workers stay away from payday loans with exorbitant fees and short terms. Yet payday loans were the solution for many federal employees with limited options, and payday loan providers saw their stock prices rise during the shutdown. Now, federal employees may deal with high-interest debt not sufficiently covered by back pay.

Herring also reminded federal workers to beware of scam artists during the shutdown, including phony employment offers and fake charities. Workers who have fallen prey to scams should report them immediately.

A second partial government shutdown is a looming possibility, President Donald Trump said in an interview with the Wall Street Journal. Should federal workers go without pay again, they will likely rely on some form of assistance. Government workers should contact banks and credit unions about special programs and take advantage of “furlough freebies” while avoiding predatory loans that merely exacerbate financial hardship.

For more information on payday loans, scams, and cash advances and check out our city and state financial guides including FloridaIllinoisTexas and more.

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