Regulators are pushing for banks, credit unions and savings associations to provide consumers and small businesses with loans to help offset the financial burden caused by the coronavirus national emergency.
The Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency issued a joint letter encouraging banks and credit unions to offer small-dollar loans to their customers.
“Responsible small-dollar loans can play an important role in meeting customers’ credit needs because of temporary cash-flow imbalances, unexpected expenses, or income disruptions during periods of economic stress or disaster recoveries,” the agencies wrote in the letter.
The letter comes after a record 3.28 million Americans applied for unemployment benefits last week as businesses shuttered in the wake of the coronavirus pandemic, laying off or furloughing millions of people.
The loans could include open-end lines of credit, closed-end installment loans or “appropriately structured” single payment loans.
“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 said.
The regulators also said that banks and credit unions should consider working with consumers and businesses who cannot repay loans as structured to find ways that they could pay back the principal without needing to borrow another loan.
Previously, this group of regulators had announced that they would count lending and retail banking activities targeted to help low- and moderate-income individuals, small businesses and small farms during the COVID-19 outbreak toward banks’ Community Reinvestment Act goals.
Other financial regulators have also taken steps to help consumers during the coronavirus outbreak. The Federal Housing Finance Agency, for instance, ordered Fannie Mae FNMA, +4.40% and Freddie Mac FMCC, +4.14% to instruct mortgage servicers to provide 12 months of forbearance on home loans to borrowers who have encountered financial difficulty as a result of the national emergency.