CFPB Issues Second Annual Financial Literacy Report; Financial Education Pros Assess Findings

by | 07/30/14 | Commentary, Uncategorized

Amid a flurry of major financial literacy developments taking place in recent days, the Consumer Financial Protection Bureau just issued its second annual Financial Literacy Report, which covers its consumer financial education activities during the past year. Since its founding in July 2011 as the first U.S. government agency dedicated exclusively to consumer financial protection, the CFPB has embarked on an ambitious agenda segmented into key areas that include education initiatives, research and innovation, and outreach to stakeholders who assist in reaching the broader public.

The CFPB has been closely watched during the last two years not only by financial education professionals, but also by the larger populace in the U.S. and, indeed, throughout the world, to evaluate the success of this major effort by the U.S. government to learn from past financial and economic problems, while establishing protocols and protections for the future. The CFPB’s founding came after the 2007 economic calamities eradicated $7 trillion of wealth in America and sparked foreclosure that drove over 4 million families from their homes. As the abuses within the financial services industry became more clear, action was demanded and, as a result, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, from which the CFPB was created.

The report released this week highlights a number of activities and initiatives the CFPB has pursued during the past year, including the following:

•  “Ask CFPB” is an interactive online tool that provides consumers with real-time answers to over 1,000 questions relating to financial products and services such as bank accounts, student loans, credit cards, mortgages, credit reports, payday loans, and debt collection. More information pertaining to this initiative can be found here.

•  “Paying for College” is a set of online tools for students and families evaluating their higher education financing options, comparing college costs and financial aid, learning about college money and loan options, and assessing repayment options. This is the first in a planned series of initiatives designed to address major financial moments in the lives of consumers. More information can be found here.

•  “CFPB en Español” provides Spanish-speaking consumers, who comprise the second largest language group in the U.S., a central point of access to the Bureau’s most-used consumer resources available in Spanish. More information can be found here.

•  Collaboration with Schools:  Schools provide the opportunity to transform the financial lives of a generation of Americans by introducing key money and finance-related concepts early, and building on that foundation consistently through the K-12 school years. The Bureau has launched a youth financial education initiative to build on existing efforts to integrate financial education into K-12 curricula and undertake other approaches to improving youth financial capability. This work includes developing criteria, or a “rubric,” to help K-12 financial education decision makers and teachers select effective financial education curricula for use with their students.

•  Collaboration with Employers:  Employers, including the federal government, can play an important role in helping people avoid financial distress and in promoting long-term financial well-being. Employers can do this by implementing practices in the workplace that strengthen financial capability, including making it easier for employees to adopt positive saving and investing habits. The Bureau is developing information for employers about workplace financial education, which we will share with other federal agencies, as well as with state and local governments and private sector employers. The Bureau also launched a targeted workplace initiative focused on empowering public service organizations to help their employees tackle their student debt.

•  Collaboration with Libraries:  Libraries are trusted institutions, and serve as a central neighborhood resource, particularly in times of financial stress. We are working with libraries and national organizations with community networks to identify useful resources and community partnerships that can help libraries develop financial education programming. This will also help librarians build the expertise to help consumers research their financial questions. More information can be found here.

•  Assistance with Tax Preparation:  Volunteer Income Tax Assistance (VITA) sites provide assistance to millions of low-income consumers each year in preparing their tax filings and applying for their Earned Income Tax Credit (EITC). This year the Bureau provided training and materials for volunteer tax preparers at approximately 100 VITA sites to use to encourage consumers to save a portion of their EITC refund at the time they learn the amount of their tax refund. The training and materials also address how to inform consumers about available savings options, such as direct deposit into an account and purchase of a Series I savings bond. The Bureau is also making materials available via download for organizations to encourage consumers to save a portion of their refunds. More information can be found here.

The CFPB remains very well positioned to continue assisting individuals and families with understanding and navigating the increasingly complex world of financial products and services, as well as with staying best informed with respect to making personal finance decisions throughout the course of their lives. Many industry observers are giving the CFPB positive marks on the Bureau’s first two years of work, while its agenda for the next year and beyond also bodes well for greater consumer protection and enhanced financial literacy among all populations targeted by the Bureau's initiatives.

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