CFPB provides insight into empowering consumer, improving financial literacy

By Stephanie K. Mann, J.D.

From its start date in July 2011, the Consumer Financial Protection Bureau has made it clear that one of its most vital missions is to empower consumers to take control of their financial lives. At the core of this mission is the bureau’s belief that financial education is the key to a better understanding of financial products and markets and, in turn, to better financial decision-making. In its latest Financial Literacy Annual Report, the CFPB discusses the strategy it employs to achieve its financial literacy goals, the initiatives built on that strategy, and the bureau’s progress in fulfilling its mission.

Overview of strategy. The Dodd-Frank Act mandates that the CFPB strive to improve the financial literacy of American consumers. In answer to that mandate, the bureau developed a strategy and a number of broad initiatives intended to help consumers make informed financial decisions. In general, the bureau’s strategy acknowledges that financial literacy requires more than providing information to consumers. Informed financial decision-making requires not only knowledge but also the building of skills and the taking of proactive steps.

The CFPB’s strategy comprises main components:

1. providing assistance to consumers at specific, important points in their financial lives via the bureau itself and by partnering with others; 
2. targeting “direct-to-consumer” educational tools and resources to consumers facing large life decisions, such as going to college, buying a home, or retiring, as well as smaller decisions that can have large consequences, such as starting savings and managing debt; and
3. engaging in ongoing dialogue with consumers and other stakeholders to share information. 

The bureau says that its strategy focuses on identifying when to engage consumers about their financial decisions and providing the information and tools to help with those decisions. The CFPB said it is addressing consumers in general as well as specific subsets of the population—servicemembers, older Americans, students, and consumers who have low incomes or are otherwise economically vulnerable.

Initiatives. The report outlines education initiatives the bureau has undertaken to promote financial literacy in the period from June 2013 through May 2014.

The CFPB developed a number of online tools to support financial education. These tools include:

• Ask CFPB: an interactive online tool that provides consumers with “real time” answers to more than 1,000 questions about financial products and services; 
• Paying for College: a set of online tools for students considering college and their parents that helps them comparison shop for financial aid; learn about costs, loans, and repayment; and evaluate their options; 
• Owning a Home: a set of online tools for consumers to use as they begin and pursue the process of finding a home mortgage product that fits their needs and their budget; and 
• CFPB en Español: a central point of access for Spanish-speacking consumers to the bureau’s most-used consumer resources. 

The CFPB also highlights initiatives that involve interaction with community institutions:

• an early financial education initiative that works with schools to introduce key money and finance-related concepts early and builds on that foundation throughout the K – 12 school years; 
• a program that pairs the bureau with employers to boost workplace financial education; 
• partnerships with community organizations, such as libraries, to raise awareness of the availability of financial education resources and train personnel to be more effective in providing those resources; and 
• collaboration with other federal agencies to integrate financial education into existing service programs or consumer relationships. 

Cordray message. CFPB Director Richard Cordray summed up the bureau’s quest for financial literacy by stating that, “Money decisions should support the hopes, dreams, and life goals of individuals and families. It takes both a financially capable populace and a well-policed marketplace to achieve that end.”

For more information about the bureau's financial literacy program, subscribe to the Banking and Finance Law Daily.