Congressman Suhas Subramanyam (D-VA) last week introduced two bills to protect federal workers and contractors from financial harm during government shutdowns.
Shutdown Guidance for Financial Institutions Act
The first bill — the Shutdown Guidance for Financial Institutions Act (H.R. 5689) — would protect federal employees, contractors, and others from the financial impacts of a government shutdown by “providing and encouraging best practices for banks, credit unions, and other financial institutions to work flexibly with people impacted by shutdowns.”
“During previous shutdowns, these individuals have suffered financial hardship through no fault of their own.” Subramanyam’s office wrote in a press statement. “In addition to the stress of being furloughed or working without pay, federal workers and contractors found themselves in danger of being denied mortgage and loan applications, missing monthly payments, and having adverse information hurt their credit score, affecting both regular financial transactions and security clearance investigations.”
Specifically, this bill would require federal financial regulators, such as the Federal Reserve, Consumer Financial Protection Bureau, and National Credit Union Association, to proactively issue guidance to financial institutions concerning government shutdowns within 180 days of enactment. This guidance would instruct these institutions to:
- Recognize that consumers and businesses affected by a shutdown may lose access to credit and face temporary hardship in making payments on debts such as mortgages, student loans, car loans, business loans, or credit cards.
- Consider prudent efforts to modify terms on existing loans or extend new credit to help consumers and businesses affected by a shutdown, consistent with safe-and-sound lending practices.
- Take steps to prevent adverse information being reported and utilized in any manner that harms consumers affected by a shutdown, including by preventing modified credit arrangements intended to help consumers fulfill their financial obligations from being reported to, and coded by, consumer reporting agencies on a consumer’s credit report in a manner that hurts the creditworthiness of the consumer.
Regulators would be required to issue a joint press release to alert financial institutions, consumers, and businesses of the existence of this guidance no later than 24 hours after the start of a shutdown.
Emergency Relief for Federal Contractors Act
The second bill — the Emergency Relief for Federal Contractors Act (H.R. 5690) would allow federal contractors affected by a government shutdown to make withdrawals from their retirement accounts without incurring the 10 percent early distribution penalty.
Under current law, retirement savers who are age 59 ½ or younger may be subject to an additional 10 percent early withdrawal penalty for withdrawing funds from their retirement accounts. The bill waives the 10 percent fee for up to $30,000 in disbursements, providing emergency relief to contractors, many of whom are not paid during shutdowns and do not receive back pay afterwards.