Van Hollen, Alsobrooks, Colleagues Take Action to Protect Federal Workers’ Financial Health as Shutdown Threatens Economic Hardship

Today, U.S. Senators Chris Van Hollen and Angela Alsobrooks (both D-Md.) were joined by several of their colleagues to introduce the Shutdown Guidance for Financial Institutions Act, legislation to require federal financial industry regulators to issue guidance encouraging financial institutions to work with federal employees and small businesses impacted by a government shutdown - including offering flexible financial arrangements to prevent them from facing additional financial hardship brought on by penalties for late payments, overdraft fees, and credit damage.

The Senators also today sent a letter, co-led in the U.S. House of Representatives by Congressman Kweisi Mfume (D-Md.), to the heads of the federal financial regulatory agencies calling on them to immediately issue such guidance as federal workers, contractors, and small businesses face the prospect of struggling to make ends meet due to a crisis that was not of their doing. In the letter that Senators Van Hollen and Alsobrooks and Congressman Mfume sent today with 21 of their colleagues, the lawmakers called on the federal financial regulators to immediately take the steps that would be required under the legislation, noting that similar actions were taken during past shutdowns and financial institutions need clear regulatory assurance to act swiftly. The letter was sent to Federal Deposit Insurance Corporation (FDIC) Acting Chair Travis Hill, Federal Reserve System Vice Chair Michelle Bowman, Comptroller of the Currency Jonathan Gould, National Credit Union Administration Chair Kyle Hauptman, Russell Vought in his capacity as acting director of the Consumer Financial Protection Bureau (CFPB), and Conference of State Bank Supervisors Chair Tony Salazar.

"No federal workers or contractors deserve to face economic ruin because of a shameful Republican shutdown that they have nothing to do with. That's why we're pushing to ensure that they have ways to safeguard their financial futures while we work to reopen the government. And we will keep fighting for a responsible government funding agreement - one that holds this lawless president accountable and prevents a massive spike in health care costs for families across America," said Senator Van Hollen.

"While President Trump continues his callous witch hunt against federal workers, I am proud to partner with Senator Van Hollen to protect our civil servants, contractors, and small businesses here in Maryland. Federal financial industry regulators must immediately issue guidance so financial institutions can work with all those impacted by this Republican Shutdown to get them the support they need. Our civil servants deserve better," said Senator Alsobrooks.

Additional cosponsors of the Shutdown Guidance for Financial Institutions Act are Senators Mark Warner (D-Va.), Tim Kaine (D-Va.), Jeff Merkley (D-Ore.), Kirsten Gillibrand (D-N.Y.), and Cory Booker (D-N.J.).

"Hundreds of thousands of federal workers and contractors in Virginia and across the country have been furloughed or are working without pay because of a government shutdown that is out of their control," said Senator Warner. "This bill will protect federal workers and advise financial regulators and institutions to work with those impacted by the shutdown."

"Federal workers, government contractors, and small businesses are often forced to make tough decisions about their finances during a shutdown," said Senator Kaine. "A number of Virginian credit unions and community banks have stepped up to provide flexibility and support affected individuals and businesses. This legislation would require federal financial regulators to issue guidance to encourage this flexibility."

"Government shutdowns exacerbate the burden on federal workers, contractors, and small businesses, making it harder for individuals who rely on federal funding to make ends meet," said Senator Gillibrand. "Helping these individuals navigate the uncertainty of a shutdown that is no fault of their own is the least we can do. By requiring federal financial regulators to issue guidance promptly, this commonsense legislation will do just that, and I encourage my colleagues in the Senate to support it."

"This shutdown is a tsunami of Donald Trump's own making, and Congress must act to shield impacted federal workers, contractors, and small businesses from it," said Senator Booker. "Hardworking Americans shouldn't suffer or see their credit scores impacted because of a shutdown, leaving them without paychecks through no fault of their own. This legislation would ensure that financial regulators act quickly to provide basic guidance in the event of a shutdown and would help families and small businesses stay afloat."

"Federal workers and contractors are regular, hard-working Americans who have bills to pay and financial obligations to meet," said Congressman Kweisi Mfume. "They should not be forced into financial hardship because Republicans in the Congress refuse to take the action necessary to re-open the government while preventing American healthcare premiums from skyrocketing."

Text of the bill can be viewed here.

Joining Senators Van Hollen and Alsobrooks and Congressman Mfume on the letter are Senators Bernie Sanders (I-Vt.), Sheldon Whitehouse (D-R.I.), Mark Warner (D-Va.), Jeff Merkley (D-Ore.), Kirsten Gillibrand (D-N.Y.), Tim Kaine (D-Va.), Elizabeth Warren (D-Mass.), Cory Booker (D-N.J.), and Raphael Warnock (D-Ga.); and U.S. Representatives Suhas Subramanyam (D-Va.), Jerry Nadler (D-N.Y.), Eleanor Holmes Norton (D-D.C.), Don Beyer (D-Va.), Dwight Evans (D-Pa.), Rashida Tlaib (D-Mich.), Gabe Amo (D-R.I.), Sarah Elfreth (D-Md.), Glenn Ivey (D-Md.), April McClain Delaney (D-Md.), Johnny Olszewski (D-Md.), and James Walkinshaw (D-Va.).

Text of the letter can be viewed here and below.

Dear Acting Chairman Hill, Vice Chair Bowman, Comptroller Gould, Chairman Hauptman, Acting Director Vought, and Chair Salazar:

As Americans across the country face the consequences of a government shutdown, we write to you to address concerns about how this may impact our nation's government employees, and how this can be addressed through your oversight. While federal law mandates that federal employees and the military receive back pay when the government reopens, the lapse in pay creates serious challenges for families. We hope that you will encourage and support banks and credit unions in efforts to provide flexible financial arrangements for their customers who endure temporary financial hardship due to a government shutdown beyond their control.

This government shutdown will cause pay interruptions for millions of federal employees, servicemembers, and federal contractors. Unexpected income shocks are a key driver of penalty fees, such as credit card late fees, overdraft fees, and minimum balance fees. Customers facing a temporary income shock could easily fall below the standard minimum balance required to uphold the terms of free checking accounts, triggering account maintenance and penalty fees.

Unexpected fees further strain government employees and servicemembers already struggling to cope with not being paid through no fault of these employees. Expenses continue even as income is halted, forcing even the most financially responsible federal employees and servicemembers to use savings to cover short-term expenses. Federal employees and servicemembers may be forced to utilize credit to make ends meet, adding to the concerningly high level of consumer credit card debt held nationwide. The monthly cost of holding credit card balances has increased as Annual Percentage Rates (APRs) have risen in tandem with the Federal Funds Rate, causing the overall cost of credit to rise significantly for those who use it. This will compound the harm that Americans are feeling right now from rising inflation fueled by tariffs, a declining labor market, and the possibility of healthcare becoming increasingly unaffordable - efforts that we are fighting for in our work to fund the government.

We urge you to issue updated guidance encouraging your regulated institutions to work with individuals and small businesses impacted by the government shutdown. We hope that financial institutions will recognize the temporary hardship caused by unexpected gaps in pay and respond by taking steps to prevent adverse information from being reported in a manner that harms consumers affected by a shutdown. Institutions can proactively work with customers to provide modified credit arrangements in order to prevent derogatory information from being reported to consumer reporting agencies. We ask that you work with, and encourage, your regulated institutions to provide flexible alternatives to financial arrangements that put their customers in a temporarily compromising financial position, recognizing that this is temporary and not reflective of the customer's true risk profile. Institutions that work with their customers to provide flexible financing arrangements and place loans in forbearance need reassurance that these actions will be taken into consideration in supervisory practices. We ask that you consider encouraging banks and credit unions to temporarily waive minimum balance, overdraft fees, and late fees for any individual or small business impacted by the shutdown.

These actions would mirror steps financial regulators made in past shutdowns. However, since the last shutdown in 2019, the financial system has faced increased stress due to interest rate risk, and the bank failures in 2023 have highlighted a stronger need for focused, concerted balance sheet management. As institutions may be reluctant to take proactive steps to assist customers, it is critical that joint guidance be issued to reduce uncertainty and empower institutions to provide flexibility to federal employees and servicemembers while mitigating any clear risk factors.

The economic cost of a shutdown is not isolated to just workers in the District of Columbia and surrounding regions. Data from the Census Bureau and the Office of Personnel Management demonstrates that federal workers reside in every Congressional District in America, meaning that local economies across the country will be harmed by federal worker furloughs.

We will make every effort to reopen the government quickly. In the meantime, we urge you to work with financial institutions to reduce burdens on federal employees and servicemembers who experience a lapse in pay through no fault of their own.