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Before adjourning, the Maine Legislature approved legislation to help the state respond to the coronavirus (COVID-19) outbreak. In doing so, eligibility for unemployment benefits for workers impacted by the virus has been expanded. The customary one-week waiting period for unemployment benefits has been temporarily waived, allowing impacted families quicker access to vital benefits. In addition, the bill authorizes the Finance Authority of Maine (FAME) to establish a no-interest loan guarantee program for Maine credit unions and banks to offer consumers, including self-employed individuals.
How the Loan Program Will Work
- The loan program guarantees up to 10% of the loans eligible credit unions and financial institutions make to impacted individuals.
- The loan guarantee fund is currently sufficient to guarantee $5 million in loans.
- Under the program, affected workers are eligible for up to 3 loans, each equal to their monthly after-tax pay, up to $5,000, less unemployment benefits.
- Repayment is due starting 90 days after the loan disbursement and during the subsequent 6 months; during that period, interest may not be charged or accrue on the loan.
- Following the end of the 270 days, a credit union or financial institution that made a loan under the program, after a good faith effort to collect the principal amount of the loan, may apply to FAME for repayment of the uncollected amount of the loan in default.
- Credit unions can begin offering these loans now. However, in order to qualify for the FAME loan guarantee, the credit union must notify FAME in writing within one business day of issuing the loan.
- No financial institution is required to offer these loans.
A Financial Assistance Path for Members
Credit unions are in the business of helping people and most are already offering their members special services like deferred payment options, financial counseling, low interest loans, etc. While this loan program is designed to help Mainers through this difficult time financially, credit unions should continue to pursue restructuring options first before encouraging members to take out additional debt. For those members who have lost their jobs, even temporarily, the best source of direct assistance is through unemployment.
For individuals, a FAME loan should be considered when unemployment benefits either don’t apply or are not enough to support their necessary financial needs.
For businesses, companies can apply for Small Business Administration loans administered by FAME.
Guidance for Credit Unions
The program is now legally available, but it needs to be implemented with care. The League is working with FAME to ensure that credit unions have the information they need to begin offering these loans in a safe and compliant manner.
Procedure on this program is currently being established as there are several non-standard aspects to these loans, including ability-to-repay, interest rates, and grace periods. In addition, FAME is instituting internal procedures on how the program will run.
The League is working directly with FAME to get procedures in place as soon as possible and the League’s Governmental Affairs team will be providing additional information on the loan process to credit unions shortly.