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 December 11, the CFPB released a tool designed to help measure a person’s financial well-being, defined in the agency’s January report as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.” The tool consists of a set of questions and a scoring worksheet, as well as abbreviated versions of both. Financial educators are encouraged to use the tool to quantify a consumer’s financial well-being on a scale that considers the person’s present and future financial security and financial freedom of choice. The scale is designed to help financial educators (i) assess a person’s financial well-being at the beginning of the consultation; (ii) track a person’s financial progress over time; (ii) gauge how effective a program is in improving consumers’ financial well-being; and (iv) analyze the relationship between financial well-being and other factors in financial survey research.
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 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.