Opinion: Helping Borrowers Through the Shutdown Isn’t Charity — It’s Smart Business

Opinions on the federal government’s shutdown and who’s to blame for the mess vary, but most can agree that it has left many Americans in a tough spot.

Well over 1 million employees experienced paycheck interruptions, and the pause in food benefits like SNAP and WIC left more than 40 million people scrambling for basic foods.

Now a huge number of people who rely on federal income and assistance are struggling to meet their bills. Low-income consumers who make up a large percentage of the subprime credit category are at higher risk.

Since their concerns are financial in nature, this is the perfect opportunity for lenders to step up and ease the pain. 

I just talked with a friend who is among the 700,000 or so government workers currently furloughed. She’s feeling desperate. An expensive divorce left her with damaged credit and she’s been trying to rebuild her scores by making all of her payments on time so she can qualify for a home loan in the future.

Now she’s worried. If she falls behind, will the late payment undo all her hard work? 

Thankfully for her, the Consumer Data Industry Association, which represents such credit reporting agencies as TransUnion, Experian, and Equifax, is responding.

It is encouraging the agencies to take the government shutdown into consideration and properly code accounts placed into forbearance or deferred payment status due to the government shutdown. 

For my friend (and countless others who are in similar positions), knowing that her credit rating may be preserved during this time is a huge relief. 

It’s also heartening to know that several key financial industry groups are urging their members to take proactive steps. America’s Credit Unions, for example, announced it has developed special communication materials and is encouraging its credit unions to offer deferred payment plans on existing loans.

The American Bankers Association, too, has taken action. It has developed a thorough and publicly accessible list of member banks that are offering special programs to federal employees. Borrowers may have access to 0% interest loans as well as fee and payment waivers.

It looks like the government shutdown will soon come to an end and life will return to normal. The temporary nature of this problem can help lenders extend themselves more than they normally would. 

Tap into available data. Lenders have the resources to identify the customers most likely to be affected by federal furloughs and benefit delays. With that information, they can target outreach. A compassionately worded message plus an explanation of what they can do to help ease the stress really does go a long way. 

A couple months of suspended payments without reporting delinquencies to the credit bureaus or adding interest can make a world of difference to borrowers. But subprime borrowers, who tend to have very little cash in reserves in the first place, would likely be the most appreciative.  

A lender that walks the talk by providing concrete assistance to beleaguered consumers helps establish good will and loyalty.

When a representative tells their customer that no payment is needed this month — take that money and spend on your family’s food bill — it not only helps someone when their need is greatest, it’s good business. 

Too often subprime lenders have been perceived as the bad guys who take advantage of desperate people. Now they can be the ones who can help the most. When they do, lenders will be seen not as collectors banging on the door, but as partners reaching out with solutions. 

Another byproduct of transparent communication and hardship programs? Five-star reviews. Regulators and consumer advocates that monitor the way lenders treat vulnerable borrowers during disruptions will see that, instead of being predatory or punitive, they are being helpful. 

Maybe it’s because I am a perennial optimist, but I see this crisis as a unique opportunity for lenders to show borrowers, critics, and the media that they can manage it in a positive way. 

The government will ultimately reopen, and paychecks and benefits will resume. When that happens, lenders will want all concerned to view them as the businesses that helped rather than hindered. I know my friend who could really use a break right now would be most thankful.