The consumer messaging of banks and credit unions through the COVID-19 pandemic has been consistent: we’re here for you.
When it comes to bank fees and loan modifications, financial institutions have largely lived up to the marketing.
Many regional and community banks and credit unions have reduced their standard fees or stopped charging them. And on loan payments, many banks are working with consumers and businesses that have had sudden income losses.
For the past two months, many local institutions have cut late fees, or reduced overdrawn checking account fees, or waived them altogether on transactions such as moving money from a money market account to a checking account, or cracking open a certificate of deposit.
About the time the banks were making these decisions, the Board of Governors of the Federal Reserve System issued a statement on March 19 recommending that financial institutions work with their customers, businesses and communities, particularly those serving modest- to low-income areas, and waive automated teller fees, overdraft charges, late payment fees on credit cards and on other loans.
Relating to payment accommodations, making loans more flexible, the Federal Reserve told banks in its statement concerning the Community Reinvestment Act that prudent efforts to modify loans would “not be subject to examiner criticism.”
Many Rhode Island banks provided loan modifications to give customers some breathing room.
Pawtucket Credit Union on April 20 expanded its “Skip a Payment” program, allowing customers to miss a single payment up to three times on a loan in a 12-month period. The program applies to auto, boat and personal loans. A separate deferral program was aimed at mortgages and home-equity loans.
‘We weren’t going to have the time or the resources to evaluate every single situation.’
LELAND MERRILL, BankNewport chief lending officer
The Washington Trust Co. worked individually with customers, said Amy Arruda, senior vice president of retail banking.
People who initially sought a payment modification or a loan extension often could be helped by other methods, she said. While consumers sought loan modifications, sometimes something simpler resolved the issue.
The bank has waived fees on transfers from money market accounts to checking accounts, and on certificates of deposit being tapped early. “It’s situational,” Arruda said. “Customers might call in and think [a loan modification is] actually what they need, but we have that conversation with them. It could be they have a CD with us, and it makes more sense to make an early withdrawal, and then we waive the fee.”
In some instances, she said, people needed just enough money to cover their household needs until unemployment benefits arrived, or to cover a single loan payment. Working with people individually helped the bank look out for their long-term needs.
“Maybe it does make sense to do a modification, that will get you through a couple of payments,” Arruda said. “You have to be thoughtful about the long-term process.”
A small portion of the Washington Trust customers sought relief, she said.
Even before the coronavirus crisis, loan relief was an option at most banks. The pandemic put that option into sharp focus. “We got together and said, ‘Look, let’s make sure these are programs that are going to fit with this situation, and let’s make sure we are doing what we can for our customers,’ ” Arruda said.
At some banks, a deferral on loan payments became an automatic approval.
BankNewport provided a three-month deferral on mortgages and other loans to anyone who applied, according to Leland Merrill, chief lending officer. Those missed payments will be tacked on to the end of the loan term.
He said about 10% of customers eventually requested this help. That was less than bank officials expected, but still a large number. The bank dedicated three additional employees to processing the paperwork.
BankNewport said it did not have the resources or time to verify financial-distress claims. If it had subjected each application to a vetting process, people would have waited three months on a decision, he said.
During the Great Recession, which unfolded more slowly, Merrill recalled, the bank provided loan leniency, but only after a hardship application was reviewed.
The speed with which the Rhode Island economy shut down in March necessitated quick action.
“We basically did a 90-day deferral program, which was really available to anyone who requested it,” he said. “We weren’t going to have the time or the resources to evaluate every single situation.“
The bank was among many to drop fees for two months, beginning in mid-March. As of June 1, they were reinstated. If people are having problems with fees compounding, they can now call the bank.
The thinking was that the bank shouldn’t be compounding the problems by adding on late or overdraft fees. Merrill didn’t recall a similar action in the Great Recession on fees.
He said the bank wants its customers to “tend to your more important needs for the time being, until things right themselves.”
Mary MacDonald is a PBN staff writer. Contact her at Macdonald@PBN.com.
