Financial Services Mistreatment and Financial Well-Being: Insights from the National Financial Well-Being Survey

Background. Individuals and families experience mistreatment and unfair treatment within the mainstream financial services industry. Such treatment can include unsatisfactory and disrespectful interactions with staff, lack of access to beneficial and affordable needed financial products and services, geographic difficulty in visiting a retail location, disability access issues, and policies and practices that result in different costs, opportunities, and experiences for various populations. Their relationships with financial institutions relies on mutual benefit, trust, and respect. Therefore, mistreatment weakens or destroys the relationship over time. Mistreatment can generate distrust and shame, which generates access, use, and self-exclusion problems, and negatively effects financial well-being. Knowledge gaps remain regarding the implications of mistreatment on consumer financial wellbeing. Financial access, indicated by ownership of financial products and services, may alter the relationship between individuals’ experience of mistreatment and their financial well-being.

Method. Using data from the National Financial Well-Being Survey (NFWS) conducted by the Consumer Financial Protection Bureau (CFPB) (n=6,171), this study uses both Structural Equation Modeling and causal mediation analysis to examine whether financial services mistreatment affects individuals' access to financial services, thereby affecting their financial well-being.

Results. Findings suggest that financial services mistreatment detrimentally affects individual financial well-being, and that the effects of mistreatment are mediated through individuals' ownerships of various financial products. The total effects of mistreatment range from approximately 5.2 to 7.0 financial well-being score points across the three analyses, which accounts for nearly 50% of a standard deviation in financial well-being scores within the NFWS sample.

The proportion of indirect effects through financial access, as indicated by ownership of five specific financial products (i.e., checking/saving account, life insurance, retirement accounts, health insurance, and a (non-retirement) investment account), is approximately 20% to 40% of the total effects. These indirect effects of mistreatment through financial access vary across different indicators of financial product ownership. These varying indirect effects suggest that financial services mistreatment may impact access to different products in different ways, and these products also have varying relationships with financial well-being.

Discussion. Using these results, advocates, policymakers, and regulators can focus on implementing policy that provides meaningful incentives and rewards for financial services industry policy and practice actions that reduce mistreatment. Examples include recognizing and rewarding mainstream financial services institutions for reducing mistreatment that results from staff interactions and practices, locating branches in geographically underserved areas, offering products and services that meet the needs of financially vulnerable populations with reasonable costs, and successfully helping people navigate from basic accounts to beneficial wealth-building products and services. Investigating fee policies and practices and work toward greater fairness and transparency is key toward building trust.