After hundreds of billions of bailout dollars and a litany of ensuing debacles, our banks are not the pride of the nation. Bankers are more maligned than used-car salesmen, it seems. Bank regulators have been completely overhauled and the aftermath of the Consumer Financial Protection Bureau won’t be written for quite a while. Trust in banks is low. Only one banker has ever received the President’s highest honor, the Medal of Freedom. What’s wrong with this picture?
Of all sectors, you’d think the conservative, risk-averse pillars of our economy – banks – would be models of trust, examples of citizenship, and pantheons of our communities.
But that’s not all: Banks don’t have a monopoly on managing consumers’ money. Alternative Financial Services providers, including finance companies, check cashers, payday lenders and payments companies also serve most Americans in one form or another. They, too, are not often listed among our heros (zero Medals of Freedom here).
We all rightfully complain about consumers’ short sightedness, addiction to instant gratification and demand for excessive credit. The financial services industry is up in arms about the CARD Act, Dodd-Frank, Durbin, CFPB and other federal initiatives to limit the industry’s opportunism.
A small nonprofit in Chicago is trying to change this: The Center for Financial Services Innovation (CFSI, with whom I am affiliated) is trying to set a standard of excellence in collaboration with financial services providers. It’s no small feat, but they are working with some of the largest financial services companies in the country, along with some of the most innovative startups.
This isn’t about corporate social responsibility, or philanthropy, or the Community Reinvestment Act (the rules that force banks to contribute to the underserved in their footprint). These standards are about self-interest. If the industry doesn’t change course, it will further lose consumer trust and risk additional regulation. Neither helps profits.
CFSI is calling this effort the Compass Principles (www.compassprinciples.com). It’s pretty straightforward, with just four leading principles:
- Embrace Inclusion
- Build Trust
- Promote Success
- Create Opportunity
Each has specific examples, and the idea is to set a high bar that is aspirational to the industry, but not out of reach. The principles are broad, but have precise ways you can succeed or fail to do so. They’re great for consumers, but free-market based and great for business, too.
Our consumer finance industry has plenty to be careful and shy about. But I hope they will chose to be bold about aspiring to something better. It’s good for business, America and Americans.