On January 28, the Financial Services Roundtable (FSR) announced a joint initiative with the CFPB to promote effective financial education throughout the country. The public-private partnership will provide tools and information to develop financial education strategies in three particular areas: (i) K-12 schools; (ii) the workplace; and (iii) communities with older Americans. In prepared remarks, CFPB Director Richard Cordray noted that the Bureau’s joint efforts with the FSR will “create more visibility and focused effort to promote financial education and share promising practices around the country,” “mak[ing] a real difference in the financial lives of all Americans.”
On November 10, CFPB Director Richard Cordray delivered remarks at the annual American Bankers Association convention. Cordray addressed efforts by the CFPB and financial institutions to collaborate in strengthening financial education, identifying the following areas of focus: (i) working with schools and teachers to provide young people with the knowledge and skills necessary to become financially successful adults; (ii) encouraging workplace financial education; and (iii) educating older Americans and those who care for them on how to avoid financial scams. Cordray called on community banks to implement financial education programs in school systems, urging bank leaders to “set the goal of making sure that financial education is required learning in all 50 states.” Cordray encouraged banks to lead by example in promoting financial education in the workplace, and to “make it a priority to educate their own employees and help them develop and use sound financial strategies, including savings for both emergencies and retirement.” Finally, Cordray applauded banks for launching the “Safe Banking for Seniors” campaign and urged them to do more to protect older consumers from financial exploitation, noting that bankers are often the first to spot red flags and should act quickly to report any suspected abuse.
On November 18, the CFPB published a report that examines the amount of money spent by financial institutions to inform and influence consumers’ decisions about financial products and services. The study analyzed spending over a one year period and found that financial institutions spend 25 times more money marketing financial products and services to consumers than on educating consumers about them, which the CFPB asserts highlights the need to improve consumers’ access to objective information. The report relays detailed findings about financial education spending across six major sectors and about annual spending on awareness advertising and direct marketing of financial products and services.
On July 17, the CFPB published its first annual Financial Literacy Report to Congress. The report, required by the Dodd-Frank Act, outlines the CFPB’s broad consumer education and outreach efforts. The report reviews the various resources the CFPB has developed on its website, including its complaint database and tools aimed at helping consumers understand college costs and payment options. The CFPB also highlights ongoing research to (i) determine how to measure financial well-being and identify the knowledge, skills, and habits associated with financially capable consumers; (ii) evaluate the effectiveness of existing approaches to improving financial decision-making and outcomes; and (iii) develop new approaches to financial education and evaluate their potential to improve financial well-being.
On April 30, the CFPB published policy recommendations for advancing K-12 financial education. The paper, “Transforming the Financial Lives of a Generation of Young Americans,” identifies perceived problems for young people in the financial marketplace and reviews current approaches to financial education for the target age groups. The CFPB recommends that state policymakers and educators (i) introduce key financial education concepts early and make a stand-alone financial education course a graduation requirement for high school students, (ii) include personal financial management questions in standardized tests, (iii) provide opportunities throughout the K-12 years to practice money management through innovative, hands-on learning opportunities, (iv) create consistent opportunities and incentives for teachers to take financial education training for use in teaching financial management to their students, and (v) encourage parents and guardians to discuss money management topics at home and provide them with the tools necessary to have conversations about money with their children.
On August 30, the SEC published a study of financial literacy. The Dodd-Frank Act required the SEC to examine (i) existing financial literacy among retail investors, (ii) methods to improve disclosures, (iii) information needed to make informed investment decisions, (iv) disclosure improvements related to expenses and conflicts of interest, (v) existing efforts to educate investors, and (vi) options for increasing investor financial literacy. The report’s findings reveal that currently investors lack knowledge of elementary financial concepts. The SEC staff reports that investors (i) prefer to receive disclosures before making a decision on whether to engage a financial intermediary, (ii) consider information about fees, conflicts of interest, and investment strategy essential, (iii) have mixed preferences on method of delivery for disclosures, but generally prefer that they be written in clear and concise language presented in summary and detailed form. The study concludes that transparency about conflicts of interest may be improved through the use of specific examples, among other things.