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Consumers Want Banks to Show Tough Love
Financial institutions must act as better consumer advocates by improving customer education and encouraging financial discipline.
Posted May 9, 2005
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Banks and credit card issuers must improve customer education and be more strict when it comes to financial obligations, bankruptcy, and credit limits, according to a study released today. Of the 500 adults surveyed by consumer research firm InsightExpress, only 37 percent of respondents said they were familiar with the contents of the Bankruptcy Abuse Prevention and Consumer Protection Act, which was passed last month. The act makes it harder for consumers to erase debt by forcing more people to file under Chapter 13 bankruptcy, rather than Chapter 7. Of those familiar with the legislation, 46 percent stated they are in favor of the bankruptcy act, with 32 percent against it, and 22 percent undecided. While few consumers said the bankruptcy act will impact them personally (30 percent), the survey reveals strong attitudes toward financial discipline and the need for consumer education. "It's important that banks and card issuers start to deliver new forms of consumer education to build stronger customer relationships," says Lee Smith, president of InsightExpress. "Participants expressed a strong desire to maintain good credit and to achieve responsible spending," The study, which surveyed participants online, revealed overwhelming consumer attitudes in favor of consumer education and holding those who are irresponsible with their finances liable for their actions. Eighty-eight percent responded that those who abuse their line of credit should be held responsible; and 86 percent feel the credit card industry should regulate itself when extending credit to high-risk consumers, like teenagers. Participants also favored credit counseling being a prerequisite for those planning to file for bankruptcy and counseling for the average consumer in terms of handling financial risk, 85 and 80 percent respectively. "Seventy-three percent of consumers said credit card companies are not doing enough to help customers who are facing bankruptcy. The bankruptcy act may represent a unique opportunity for banks and card issuers to enhance their reputation as consumer advocates," says John Kaminski, financial service practice director for Insight Express. Smith maintains that while there is a general perception many people don't care about their credit rating and simply file for bankruptcy to solve it, the survey results say otherwise. "The research confirms that people are very concerned and they don't want to go that route," he says.
Regarding how they would like to be made more aware of practices and policies governing credit cards and banking, participants overwhelming responded they would like to be informed of this information at either the start of their financial relationship or on a monthly basis. Eighty-six percent would like to see details on the consumer agreement during sign-up, 80 percent on their monthly statements, and 77 percent through direct mail. "The survey showed that consumers are clamoring for additional information about what these obligations are so they can avoid the bankruptcy situation," Smith says. "If they can start to provide this information on something that's completely out-of-the-box, I think credit card companies and banks will be really well received by consumers." Related articles: Taking Bank Vaults Online Banks Are Failing to Cash in on Customers
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