AND SOCIAL PRIVATE LENDING to reduce everything to an economic entity: the fundamental purpose of business is to make money, maximize profit and increase shareholder value. How many students ever questioned the fundamental purpose of something? It’s the ultimate ethical questions: What’s your purpose? Some people liken moral behavior with legal behavior. People are complacent that the only requirement is to obey the law. They tend to ignore the spirit of the law in only following the letter of law, disregarding the fact that even though an action not be illegal, it still may not be moral. For example: When an investor has to move a home into foreclosure it’s often because the owner is suffering the “3 D’s: death, divorce or disease.” Just when a person is struck by tragedy and needs all the comfort of home, a failure to make a payment (or two) leads to endless phone calls and letters from lenders (or collectors for lenders.) Legally, could a lender follow through with a foreclosure if an agreement is broken? Of course. To avoid looking unethical – as if you didn’t originate a loan based solely on the desire to see the recipient fail so you could obtain the title – consider loan modifications, forbearance agreements, and repayment plans so foreclosure can be avoided. Professional duty can conflict with company demands. A faulty reward system could induce unethical behavior. A purely self-interested agent would choose that course of action which contains the highest return to him or herself whether tangible like a monetary gain or intangible like positive recognition within the company. Individual responsibility can wither under the demands of the client. Sometimes the push to act unethically comes from
the client. How many people expect their accountants to pad their expenses where possible? How many clients expect their insurance agents to falsify their applications or claims? It’s a temptation once you have a relationship with the client, you really want to help you client out. That’s just another conflicting loyalty. WHO’S RESPONSIBILITY IS FINANCIAL SECURITY? Let’s start by saying that consumers need to be better informed. It doesn’t necessarily mean that they need to know everything about the service you are offering, but they should know enough to ask the right questions. With the financial world in a constant state of change, you, as an industry professional, need to be educated enough to answer those questions accurately. Strategies that worked a few years ago don’t always apply today. There are plenty of opportunities you can take advantage of to generate positive results instead of practicing “accidental ignorance” and putting yourself and/or your company in jeopardy of acting unethically. Being socially responsible or practicing responsible lending has been making an imprint on the financial marketplace around the globe. Solid rates of return and sustained level of success have posted through turbulent markets and are attracting institutional investors. A corresponding grassroots movement in the mortgage and personal loan market may signal the beginning of a much larger trend. A trend that fights back against fraudulent transactions by scam artists and works on repairing the unethical reputation that private lending has been plagued with. ______ Chrissey Breault is the Director of Marketing and Member Services of the American Association of Private Lenders.
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