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Banks and credit unions with large numbers of account holders who are federal workers or receive federal benefits are starting to offer special assistance if the U.S. government can’t make payroll because of the looming debt limit crisis.

The lenders are hoping the assistance isn’t needed and that the government averts a looming financial crisis caused by negotiations over the legally mandated debt ceiling. Millions of Americans who rely on the federal government for paychecks or federal assistance may be at risk of missing payments because the U.S. may have to cut spending by 40 percent starting Aug. 2, 2011, unless President Obama and Congress reach an agreement on exceeding the debt limit.

“The potential fallout from the issues surrounding our nation’s debt ceiling could create another moment of great need for service members and others who may not get the pay and benefits they need to make their obligations and pay their bills,” says Nicole Alley, a spokeswoman for USAA Federal Savings Bank, a national bank with more than 8.2 million members, many of whom have served or are serving in the military.

Lending a hand

USAA is among a handful of financial institutions that have announced plans to help customers who may be impacted should the federal government be unable to pay its employees. The Navy Federal Credit Union, which has 3.7 million members from every branch of the military as well as the Department of Defense, will “cover any gap in pay that the government doesn’t cover,” says Jennifer Sadler, assistant vice president of corporate communications. “We’ll make them whole … We’ll cover the gap.”

Among the things being offered by the institutions are:

Payroll advances.

One-time account credits to cover the amount of the missed federal payroll or benefit deposit.

Short-term, low-interest loans.

Waiver of fees, such as credit card late fees or insufficient funds or overdraft fees.

Skipping payments.

Flexible payment arrangements.

Increasing lines of credit.

Refunding overdraft fees.

Alley from USAA said the bank is getting the word out early so that members can begin to think of contingency plans for their personal finances should a fiscal crisis occur. “It’s really about being prepared to help our members in their moments of need,” Alley says.

Credit union moves

Some smaller institutions are making offers, as well. The 140,000-member Texas Dow Employees Credit Union said it would offer 30-day “government shutdown loans” to its members who rely on Social Security and other government checks. At First Command Bank, where 35 percent of the nearly 100,000 clients are military or federal employees, direct deposit customers will receive credits on their accounts for any missed paychecks from the regular August payroll. Accounts will be debited once the government resumes regular payments. The bank is also offering to defer monthly payments on loans and credit cards.

In addition, Randolph-Brooks Federal Credit Union, which has about 350,000 members primarily located in south central Texas, will credit accounts that come up short if the government can’t make good on its financial obligations.

“We will provide members with a one-time provisional credit on their account if they are a government payment recipient and they are impacted,” says Sonya McDonald, senior vice president of planning and market development for Randolph-Brooks. A credit union member who typically receives a Social Security check on the third day of the month can get a credit to his or her account for August 2011. McDonald says the bank will base the amount of the credit on what was deposited into the account in July 2011.

“By our estimates, we have about 57,000 members that could potentially be affected,” McDonald says.

She adds: “Once Washington decides how they are going to deal with the deficit and the payment goes through, we will reverse the credit.”

Asked what will happen if the budget crisis extends another month or more, she said, “Right now, we are just dealing with the first one.”

Randolph-Brooks is also offering low interest rate, short-term loans to members “on a case-by-case basis,” McDonald says. Members who “feel they may need a little extra money to tide them over until this issue is resolved” can contact the credit union.

Both Alley and McDonald say what they are offering is no different from special assistance given to members who are impacted by tornadoes and other natural disasters. Navy FCU offered similar assistance in April 2011 when another government shutdown loomed but was averted.

“Our members are already struggling with the high cost of gas and other expenses. We want to alleviate as much of the stress as possible,” McDonald says.

“A lot of these things are standard whenever any of our members face hardships,” Alley says, adding, “We remain hopeful that there won’t be a need.”

See related:How to deal with a debt limit meltdown