Rep. Maxine Waters, D-CA, asked five federal financial regulators Tuesday to reaffirm guidance that would encourage lenders to work with borrowers so the now-weeklong government shutdown won’t affect their creditworthiness.
“Through no fault of their own, hundreds of thousands of Federal workers, servicemembers, and Federal contractors have been adversely impacted and may find it difficult to meet their credit obligations while they are not being paid,” Waters, the ranking member of the House Financial Services Committee, wrote to top officials at the Federal Reserve, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., National Credit Union Administration and Consumer Financial Protection Bureau.
“We surely agree that prudent workout arrangements that are consistent with safe-and-sound lending practices are generally in the best interests of the financial institution, the borrower and the economy,” Waters added, noting that she made a similar request during a 35-day government shutdown in 2019, and regulators responded the next day.
“While the effects of the federal government shutdown on individuals should be temporary, affected borrowers may face a temporary hardship in making payments on debts such as mortgages, student loans, car loans, business loans, or credit cards,” the five agencies – and the Conference of State Bank Supervisors – wrote in January 2019 guidance.
“As they have in prior shutdowns, the agencies encourage financial institutions to consider prudent efforts to modify terms on existing loans or extend new credit to help affected borrowers,” the agencies wrote at the time. “Such efforts should not be subject to examiner criticism.”
But observers may note that this year’s government shutdown is unlike its predecessors. For one, it’s yet unclear the regulators, under this Trump administration, will grant borrowers that flexibility.
In response to the 2019 shutdown, Trump signed into law the Government Employee Fair Treatment Act, which guaranteed that furloughed employees would receive back pay shortly after Congress comes to an agreement over funding.
But a White House memo Tuesday, first reported by Axios, interprets the 2019 law differently – suggesting that only workers who are deemed essential – such as service members, air traffic controllers and those required to report for duty during the shutdown – may be automatically entitled to retroactive pay.
When pressed Tuesday at the White House whether furloughed employees could lose back pay, Trump told reporters it “depends on who you’re talking about.”
“For the most part, we’re going to take care of our people,” Trump said, according to CNBC and The New York Times. “There are some people that really don’t deserve to be taken care of, and we’ll take care of them in a different way.”
The comment may lend credence to speculation that the administration intends to use the shutdown to permanently reduce staff at various government agencies and cancel select contracts – an effort that leaders at the CFPB, as an example, arguably tried but found barriers when the matter went to court.
When asked why he thought some workers would not get their back pay, Trump told reporters, “Ask the Democrats that question.”
In a post Tuesday on the social media platform X, Sen. Patty Murray, D-WA, wrote: “The letter of the law is as plain as can be — federal workers, including furloughed workers, are entitled to their backpay following a shutdown.”
Murray, vice chair of the Senate Appropriations Committee, called the Trump administration’s position “another baseless attempt to try and scare & intimidate workers.”
At the White House on Tuesday, Trump later clarified he would “follow the law, and what the law says is correct,” according to The New York Times.
