Scoring the Banks: Building a Behaviorally Informed Community Impact Report Card for Financial Institutions
Brescia, Raymond H., Steinway, Sonia, Fordham Journal of Corporate & Financial Law
The U.S. financial system faces a crisis. Unlike fiscal crises, this one is of consumer confidence and trust. Recent polls suggest that faith in American banks is at a forty-year low. Many blame the banking sector for having a significant role in causing and exacerbating the financial crisis of 2008, as well as the deep recession that has followed. Scandals, litigation, and a lack of accountability for conduct that has breached the public trust mean that many consumers of bank services are starting to call for greater transparency in banking practices, financial institutions that are more responsive to community needs, and a broader array of alternatives to traditional banks. Initiatives such as the Move Your Money campaign and Bank Transfer Day have captured the imagination of many bank customers who are looking to use their consumer clout to support financial institutions that are engaged in responsible practices. Perhaps as a way to counter this crisis in confidence, regulators, local governments and consumers alike seek ways to measure bank responsiveness to consumer wishes and community needs. This paper describes one such tool: the Community Impact Report Card ("CIRC"). Modeled on other grading systems-such as New York City's method for grading restaurants-and informed by principles of behavioral economics, CIRC is a tool designed to offer consumers a means through which they can easily comparison shop between banks. This comparison is based on those banks' effectiveness in meeting consumer demand for accessible and inexpensive products and services, and is also meant to encourage banks to strengthen the array of products and services they offer. By providing a range of information about the products and services offered by local banks, and generating a single score for each bank based on this information on a scale of 1-100, consumers will have an easily accessible way to compare how each bank serving the community is generally responsive to local needs and interests. Flexible and adaptable, CIRC system is designed to be tailored to the needs of local communities and to be applied to the array of financial institutions that serve them.
The U.S. financial system faces a crisis of consumer confidence.1 According to recent polls, faith in American banks is at a forty-year low.2 Consumers and financial experts alike blame banks for causing the 2008 financial crisis and the deep recession that followed. As a result, consumers are pushing for financial institutions to be more responsive to their needs, as well as seeking alternatives to the traditional banking sector. Campaigns such as the Move Your Money project and Bank Transfer Day have captured the imagination of many customers who are looking to use their consumer clout to support more responsive - and responsible - financial institutions.
As a way to counter this crisis in confidence, regulators, local governments, and consumers have attempted to measure bank responsiveness to consumer and community needs. This paper describes one such measuring tool, the Community Impact Report Card ("CIRC"). CIRC was initially used to provide consumers with information about bank products and services in the city of New Haven, but it was designed to be replicable in any community.
Community Impact Report Cards for all of New Haven's consumer banks were published in October 2012 with the intent to create a dialogue between the New Haven community and the banks that serve it. CIRC serves two distinct audiences: first, consumers can use the ratings to easily compare across banks. By providing a . range of information about bank products and practices, and generating a single score for each bank on a 100-point scale, consumers will be able to compare how each bank serves community needs. Second, CIRC is also targeted to banks themselves, as an impetus to strengthen their array of products and services. In addition, CIRC serves a broader audience outside of New Haven; other communities are encouraged to use the CIRC methodology, while shaping and adapting the index to meet their own local needs. …