Five federal financial regulatory agencies are encouraging banks, savings associations and credit unions to offer small loans to consumers and small businesses in response to the coronavirus pandemic.
In a joint statement issued on Thursday (March 26), the Federal Reserve’s Board of Governors, Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corp. (FDIC), National Credit Union Administration and Office of the Comptroller of the Currency said small-dollar loans can play a key role in meeting credit needs because of temporary cash flow problems, unexpected expenses or loss of income during this period of economic stress.
Saying federally-regulated financial institutions are in a good position to meet the needs of citizens during the coronavirus crisis, the letter noted these institutions may have financial products that “could be used or modified” to help consumers now.
“Such loans can be offered through a variety of structures including open-end lines of credit, closed-end installment loans, or appropriately structured single payment loans,” the letter said.
Loans should be offered in a manner that provides fair treatment of consumers, complies with applicable laws and regulations, and is consistent with safe and sound practices, the agencies suggested.
“For borrowers who experience unexpected circumstances and cannot repay a loan as structured, banks, savings associations and credit unions are further encouraged to consider workout strategies designed to help borrowers to repay the principal of the loan while mitigating the need to re-borrow,” they wrote.
The collaborative effort follows other actions taken by the agencies to encourage lenders to meet the financial services needs of those affected by COVID-19.
Earlier this month, agencies told institutions they will favorably consider retail banking and lending programs that meet the needs of impacted low- and moderate-income individuals, small businesses, and small farms for Community Reinvestment Act purposes, consistent with sound banking practices and applicable laws, including consumer protection laws.