The "Bank of Mom and Dad" is Seventh Largest Provider of Borrowed Funds for Younger Adults
Ginger Szala, in a May 17, 2019 article in thinkadvisor.com reports that traditional lenders face a formidable competitor – older parents… to the tune of $47.5 billion.
This development impacts credit unions in several ways: (a) it is hard to compete with Mom and Dad when it comes to loan pricing; (b) older parents could be adversely impacting their retirement savings by not seeking the highest returns - which impacts seniors’ financial security; and (c) credit reports for younger people probably does not reflect borrowings or payment history from the “Bank of Mom and Dad”. This phantom debt of younger generations makes it difficult for traditional lenders to determine the credit worthiness of many younger applicants. Methods to carefully scrutinize loan applications for phantom debt should be explored.
TCT Risk Solutions provides Regulatory Compliance and Policy Creation services to client credit unions to help develop risk management policies that are in compliance with a myriad of regulations including regulations addressing illegal discrimination.