Responsible lending & borrowing where does the buck stop?

Responsible borrowing and lending

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Responsible lending is to ‘act in a customer’s best interests, ensuring affordability, transparency of terms and conditions and supporting a borrower if they experience repayment difficulties’. Lenders have a responsibility to make sure borrowers understand the details of a loan and carry out thorough checks on any borrowers, so they can be confident that what customers will receive will be suitable for their circumstances.

Responsible borrowing and lending: Consumer credit is a part of everyday life for many people, helping to smooth inconsistencies of income and expenditure and manage financial resources flexibly. However, the concern is that the use of consumer credit, particularly the use of high-cost credit, can lead to financial difficulties and over-indebtedness.

The pandemic has led to numerous debates about the responsibility of the financial services sector and for the treatment of low-income borrowers. The phrase ‘we’re all in this together’ became something of a motto and the Government was quick to introduce tax breaks, the furlough scheme, bounce back loans etc. But, whilst everyone has felt the impact of covid, the financial impacts have not been absorbed equally.

Patrick Leahy, CEO, Elva said:

“Our personal ability to absorb the financial knocks of the pandemic is determined not only by our individual circumstances but also by our broader family situations.

As we have seen with certain areas of the economy our individual ways to recover is not linear and some people will need more support for longer than others. As far as ‘responsible lending’ is concerned, consumer groups have called for greater reform of the banking sector to ensure financial institutions play their part in accepting responsibility in this field.

Consumer protection and choice are going to help us navigate our way through the next stages in our economy, this can be achieved through education and support through employers so that employees can be offered the most appropriate financial wellbeing products to give peace of mind that the right (responsible!) decisions are being made.”

Retirement planning resources and education are the most commonly offered financial wellness benefits for most organisations and while they remain important, employees need to be offered more. By adopting a financial wellness strategy, company-wide and offering support that caters for a wider range of financial health challenges can help employers recruit and retain top talent because employee engagement works!

What can be offered?

Digital financial education: Employees, especially millennials and Gen-Z, are hungry for financial planning apps/websites and tools to help with their financial decision-making. They don’t want to be tripped up by buy-now pay later schemes, or high-cost lending.

Earned wage access: Keep track of earnings, get a better understanding of finances by checking how much has been earnt throughout the month, and if needs be, access their salary in real-time, without the need to wait until the end of the month. A real benefit in helping to meet expenses throughout the month.

Benefits checker:  Your employees may not be aware of all the government benefits and support that are available to improve your financial wellbeing. Using a benefits checker will help to make sure they’re not missing out.

Personalised financial coaching: While talking money at work has traditionally been deemed taboo, this highly requested benefit has a high take-up rate from employees. Here you can develop your own financial plan with help through an app. Access to personalised information and advice from regulated financial advisers.

Responsible borrowing & lending: Employees can benefit from better rates for savings and loans via Credit Union Loans who typically offer higher rates for savings and lower rates for loans than traditional banks.



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