When did the world of finance lose its moral compass?
Anybody can be there when it’s going right, but what about when it’s going wrong?
By Lee Travers
Most of us have been brought up with the idea that we shouldn’t lend, or gamble, what we cannot afford to lose. Yet banks, in my opinion, don’t lead by example and take their responsibilities as seriously as they should.
It’s more a case of 'Do as I say, not say as I do'.
Banks - the largest institutions on the planet - say that the onus is on the individual not to borrow money they supposedly cannot afford. But, if it’s going to make them a profit, then they will still lend it to you, regardless.
When things do go wrong and a customer defaults on their obligations, they throw their toys out of the pram. Talk about victim blaming - it’s not right!
I was brought up to work through problems and not give up. Therefore, I believe that it should be a bank or creditor’s responsibility to work with a customer and help them to get back on track; instead of hitting them with further charges and fees when they’re already down.
When you lend someone money and something happens in the market, you should have a moral responsibility to then work through it with them. We all go through rough patches; it’s how we make it through them that determines our path in life.
Banks talk a good game; often stating their social responsibility in their marketing material. But, what about their moral obligations? There isn’t any regulation to govern that!
I remember when the recession hit, my father became a licensed Insolvency Practitioner - he spent time talking to people and finding a way that he could work through their debt situation with them - helping customers and friends negotiate their way out of trouble. The banks were running to foreclose on these people and he stepped in to handle it. When talking about the bank's view on who was responsible, it was like listening to the devil read scripture.
He sought to find a win-win for everyone, including the banks. He also did it for free and all of those he helped are back on their feet. Unfortunately, banks do not have the same attitude.
A bank’s main worry is not you, or the stress that debt may cause you, all they care about is how they will get their money back.
New home, or death wish?
A mortgage is probably one of the biggest debts that an individual will take on in their lifetime - if they’re lucky enough to be in a position to even get one. However, the word 'mort-gage' literally means 'death pledge' in Latin.
You may think this is a bit harsh, considering that your first home is meant to be your introduction to the property ladder, as well as a place of happiness and security. However, when you look at the foreclosure rates, you begin to see why, for many, owning a home can often be more stressful than one would think.
The word 'mort-gage' literally means 'death pledge' in Latin. You may think this is a bit harsh, considering that your first home is meant to be your introduction to the property ladder, as well as a place of happiness and security.
Look at the global financial crisis of 2008, when consumers were catastrophically let down by their banks and building societies. It stands as a good reminder of how quickly something can go wrong. Regardless, the banks still didn’t take any responsibility. Instead, they let the majority of customers suffer and subsequently default on crippling debt.
At the height of the financial crisis in 2008, a total of 861,664 families lost their homes to foreclosure
At the height of the financial crisis in 2008, a total of 861,664 US families lost their homes to foreclosure, according to a report by RealtyTrac. The report adds that there were more than 3.1 million foreclosure filings issued during 2008, resulting in one in every 54 households receiving a notice.
Thankfully, these statistics have significantly improved since 2008, with foreclosure figures back down to pre-recession lows. However, according to a survey by the non-profit MacArthur Foundation and Hart Research Associates, entitled 'How Housing Matters', housing challenges continue to personally impact individuals at very high rates. More than 55% of Americans reported that they have had to make a major sacrifice - such as getting a second or third job, lowering their grocery costs, or taking out credit card debt - in order to cover their mortgage or rent payments.
However, the report adds that over 50% of those surveyed agreed that when families have comfortable and affordable housing, not only does it improve their mental health, but they are then able to invest the money they save on their future.
Families living in affordable homes were found to be in a better position to buy health insurance, pay down debt, save to pay for education, buy a home, or start a business.
So, why aren’t banks keen to help?
Just a number!
In today’s world, we are all merely a number to our bank. The days of the personal, customer-centric approach – when you used to be able to walk into your bank and have a friendly conversation with your bank manager who had your best interests at heart - have disappeared. We are now valued on what we earn and how much we’re worth. As a result, the number of people suffering with mental health related issues has increased, and money problems have been a real contributor.
According to a 2015 study in the American Journal of Preventive Medicine, death by suicide rates in adults aged 40-64 climbed 40% since 1999, with a sudden increase in 2007. Researchers found that factors such as job loss, bankruptcy, foreclosure and other financial worries were present in 37.5% of this group in 2010, up from 33% in 2005.
This shouldn’t be the case. No-one should have to be in such an awful financial position that they contemplate such tragic action.
If the bank won’t help – the community will...
However, whilst the banks may treat us this way, it seems that as a society and within our local communities, compassion and ethics are shining through. There has been a phenomenal surge in crowdfunding through sites such as GoFundMe, where individuals can tell their story and ask friends and strangers to donate towards their endeavours.
After all, as former British Prime Minister Winston Churchill famously once said: “We make a living by what we get, but we make a life by what we give.”
Some of the most successful community fundraising campaigns were:
In Austin, Texas, the world’s oldest World War Two veteran asked for help with his daily care needs. In just one week, over $85,000 was raised, with the total reaching over $148,000.
In Compton, California, a teenager who had overcame life's obstacles to make it into Harvard, asked donors for help with his education-related expenses, which his family couldn't afford. More than $21,258 was pledged by generous people around the world.
Finally, in Washington DC, an African boy named Sampson, needed life-saving surgery. Greta Van Susteren, who met the boy on a trip to Africa, said that he had made a lasting impression on her and therefore turned to GoFundMe to raise $115,000 in just one day to change this little boy's life forever. She raised over $155,953.
All of these are heartwarming stories. But, should we really be asking friends and strangers, who may be struggling for money themselves? I think not! Surely it should be a bank’s moral responsibility work with us through difficult times?