Regulators incentivise customer, small business support

Federal agencies have taken actions to encourage bankers to support their customers and aid small businesses as the economic impacts of the novel coronavirus continue to develop.

Federal banking regulators said March 19 that waiving late-payment fees, increasing credit card limits and taking other steps to support consumers affected by the Coronavirus pandemic can earn banks credit toward their Community Reinvestment Act requirements.

In a joint statement, the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency agreed to give “favorable consideration” to banks under the CRA for their efforts to assist lower-income borrowers, small businesses and small farms experiencing hardships as a result of COVID-19.

“The agencies recognize that such efforts — when consistent with safe and sound banking practices and applicable laws, including customer protection laws — serve the long-term interests of these communities and the financial system,” the statement said.

The agencies offered examples directed at the affected customers that could receive CRA consideration, including waiving overdraft charges and other account fees, boosting credit limits, expanding short-term loan programs and extending payment deadlines. Modifying the terms on their outstanding loans and easing terms on new loans might also apply, according to the statement.

Favorable consideration will be given to community development activities located in a broader statewide or regional area that includes a bank’s CRA assessment area and that help to stabilize communities affected by COVID-19, provided that such institutions are responsive to community development needs and opportunities that exist in their own assessment areas.

These guidelines will remain in effect for up to six months after the COVID-19 national emergency was declared on March 13. Citizens Bank, Edmond, Okla., mailed out 60-day loan payment deferment options to all its consumer borrowers as part of its COVID-19 relief program to meet cash flow needs, according to a tweet on March 19 by Jill Castilla, president and CEO.

The number of Americans who filed new claims for unemployment benefits surged by 70,000 in the week ending on March 14, the highest level since 2017.

“The increase in initial claims are clearly attributable to impacts from the COVID-19 virus,” the U.S. Department of Labor said in a statement on March 19. A number of states specifically cited lay-offs related to the coronavirus pandemic, while many states reported increased layoffs in service related industries, accommodation and food services industries, and in the transportation and warehousing industries, the release said.

The U.S. Small Business Administration, however, announced relaxed disaster assistance loans for small businesses impacted by COVID-19.

The SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance for each affected small business to provide economic support and overcome temporary loss of revenue. 

“Our goal is to ensure that credit is available to any and all small businesses that need credit but are unable to access it on reasonable terms through traditional lending channels,” said U.S. SBA Administrator Jovita Carranza. “To that end, the SBA is relaxing the criteria through which states or territories may formally request an economic injury declaration.” Once an economic injury has been declared, the new rules allow the affected small businesses within the state or territory to apply for a disaster assistance loan.

The relaxed criteria will have two immediate impacts: Faster and easier qualification process, and expanded statewide access to the loans. The revised criteria requires the state or territory to certify that at least five small businesses suffered substantial economic injury, and the disaster assistance loans will be available statewide following an economic injury declaration. This will apply to current and future disaster assistance declarations related to the novel coronavirus.