Consumers who are financially healthy are able to pay their debts. That means it behooves companies in the credit and collection industry to do what they can to help consumers remain financially healthy. It is under that purpose that Michael Hsu, the acting Comptroller of the Currency, a regulator that oversees national banks across the country, gave a speech yesterday on the topic of consumer financial health and outlined what companies in the financial services industry should be doing to help consumers in this area.
Hsu highlighted that banks’ support in improving financial health not only enhances customer relationships but also positively impacts mental well-being. Financial stress is a significant contributor to poor financial decisions. By focusing on financial health, banks can help reduce this stress, leading to better financial planning and decision-making among consumers. This, in turn, can result in more loyal and engaged customers, benefiting both the banks and the communities they serve.
The OCC has developed three key metrics, termed Financial Health Vital Signs, to provide actionable insights into consumer financial health:
- Positive Cash Flow: This metric indicates a customer’s ability to meet regular expenses from their regular income, helping them avoid fees and build savings.
- Liquidity Buffer: This measures whether a customer has sufficient liquid assets or available credit to withstand unexpected expenses or income drops.
- On-Time Payments: This reflects a customer’s ability to meet debt obligations regularly, avoiding delinquency and over-indebtedness.
Hsu urged banks and other stakeholders to pilot these metrics and provide feedback on their effectiveness. He emphasized the importance of aligning internal performance goals with customer financial health outcomes and exploring partnerships with community-based organizations to better serve underserved populations.
