Central Bank warns banks against using unemployment benefits to repay loans

Central Bank warns banks against using unemployment benefits to repay loans
The Central Bank of The Bahamas. (PHOTO COURTESY OF THE CENTRAL BANK)

NASSAU, BAHAMAS — The Central Bank yesterday urged commercial banks and credit unions not to involuntarily use clients’ COVID-19 unemployment benefits for loan repayments.

The regulator acknowledged concerns that unemployment benefits and equivalent government assistance payments for COVID19 relief will be involuntarily redirected when deposited to client accounts.

“Moreover, the Bank is aware that recipients might be electing less efficient payment options to avert this suspected practice,” the bank said.

“The Central Bank does not endorse the involuntary redirection of unemployment benefits or other government funded assistance payments. Given the volume of such payments and public health safety concerns around processes by which these are being converted to cash, avoidance of direct deposits is not in the interest of the orderly functioning of the domestic payments system nor the domestic banking system.”

The regulator added that it has requested that commercial banks and credit unions maintain adequate systems to preserve COVID19 income replacement proceeds for their intended social safety net use.

“Financial institutions have also been requested to communicate with their clients, through accessible public channels, on the processes that have been established for recipients to recover proceeds that were involuntarily applied to other purposes,” the regulator said.

“Recipients of unemployment benefits and assistance are urged to have payments sent directly to their deposit accounts, and to request correct guidance from their financial institutions on how to specify their account numbers.”