Managing Declines Positively
Dr Paul A. Jones and Nick Money, Swoboda Research Centre
Access to affordable credit is a recognised key element of financial inclusion. If providers, such as credit unions and Community Development Finance Institutions (CDFIs) decline applicants for credit, there is the danger that they will turn to high-cost credit providers with all the possible detriment that may incur. Although the point of decline is an understood moment of vulnerability for consumers, little is known about what those who are declined do next. With this group of consumers likely to grow as the economic impacts of the pandemic take effect, solutions are needed that reduce their vulnerability.
The Swoboda Research Centre and the Centre for Business in Society (CBiS) at Coventry University believe that there is an opportunity to convert loan declines into approvals over time – without lowering lending criteria – by building long term relationships with the people they serve and helping them to improve their financial capability. These partners are undertaking a programme of research to identify the opportunities to change the behaviour of community finance providers to improve how they help declined members.
The proposed project aims to change the practices of credit unions and CDFIs in managing declines, to better support these vulnerable clients, leading to positive change in their financial wellbeing.
Project Impact Statement
Informed by an analysis of the needs and experiences of those declined, a Best Practice Manual to Managing Declines Positively for credit unions and CDFIs will be developed. The Manual will contain solutions for handling declines that have been tested with CDFIs and credit unions.
The outcome will be a change in the practices of these providers in managing declines, and an opportunity to thereby influence mainstream banks, leading to better support for this vulnerable client group. A longer-term outcome from this change in provider behaviour is expected to be improved wellbeing for borrowers, arising from an improved credit score or affordability position, and the ability to borrow safely.