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New York to expand access to safe and affordable financial services
On January 4, the New York governor unveiled a proposal to expand access to safe and affordable financial services as part of the 2020 State of the State agenda. Included is a proposal to create the “Excelsior Banking Network” (Network), which is intended to “expand financial inclusion and access to affordable bank accounts and credit products” by providing $25 million in seed funding for the state’s Community Development Financial Institutions (CDFI) Fund. The Network—formed through a collaborative initiative between CDFIs, NYDFS, and other state agencies—will, among other things, engage in outreach and financial literacy education to the unbanked and expand available microcredit. “CDFIs are local financial service providers with locations throughout New York State, and often are the sole provider of banking and other financial services in low-income communities that are not served by traditional banks and financial institutions,” the announcement stated. Funding will be leveraged by participating CDFIs through targeted investments in underserved communities.
The governor also proposed the creation of a statewide Office of Financial Inclusion and Empowerment (Office), which is intended to meet the financial services needs of low- and middle-income New York consumers. The Office will be based at NYDFS, and “will maintain a centralized list of financial services counseling providers—across housing, student loan, debt, and general financial literacy—throughout the [s]tate and coordinate state and local services aimed at expanding access to credit and enhancing financial empowerment.” According to the announcement, the Office will also “incubate new programs to expand access to safe and affordable banking services, credit and financial education; coordinate public-private partnerships; and foster provision of high-quality, low-cost financial products statewide.”
FTC to Host Military Consumer Financial Workshop
On July 19, the FTC will host a free public workshop in San Antonio, entitled 2017 Military Consumer Financial Workshop: Protecting Those Who Protect Our Nation, to educate military consumers on financial issues and scams that they may face.
The workshop with consist of five panel discussions led by FTC personnel as well as military consumer advocates, attorneys, legal services clinics, industry representatives, and government agencies. The panels will include the following topics:
- auto purchase, financing, and leasing;
- lending including student loans and installment loans;
- debt collection;
- legal rights and remedies; and
- financial literacy and capability.
Additionally, the workshop will include presentations on online promotions and protecting sensitive information, as well as encouraging financial readiness along with financial resources for military consumers.
The FTC will hold the workshop at Trinity University in the Chapman Auditorium beginning at 8:30 am and preregistration is not required.
CFPB Releases Financial Well-Being Tool
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.
CFPB Director Delivers Remarks on Financial Literacy at Annual ABA Convention
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.
CFPB Partners with Industry Group to Improve Financial Education
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.”
CFPB Report Claims Financial Education Efforts Insufficient
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.
CFPB Outlines Financial Literacy Strategy in Report to Congress
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.
CFPB Proposes Financial Education Policies
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.
SEC Releases Dodd-Frank Financial Literacy Study
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.