Compliance Blog

Financial literacy and financial education are important to the National Credit Union Association (NCUA). NCUA has a financial literacy and education resource center landing page on its website that is designed to "help credit unions promote financial literacy to assist their members with making smarter financial decisions." As NCUA states on that landing page, promoting financial literacy reinforces the Federal Credit Union Act: "credit unions were organized for the purpose of promoting thrift among its members and creating a source of credit for provident or productive purposes."

Late last month, the Bureau of Consumer Financial Protection (CFPB) released its Financial Literacy Annual Report for fiscal year 2019 (2019 Report). The 2019 Report was the CFPB's seventh such report, and it covered the CFPB's financial literacy activities during the 2019 fiscal year and its strategies to improve the financial literacy of consumers. The 2019 Report, like the six annual reports that preceded it, is required by the Dodd-Frank Act. See, 12 USC § 5493(d)(4).

The CFPB's focus on financial literacy and financial education arises out of the Dodd-Frank Act:

"One of the Bureau's five statutory objectives is to ensure that 'consumers are provided with timely and understandable information to make responsible decisions about financial transactions,' and one of the Bureau's statutory functions is 'conducting financial education programs.'" See, 2019 Report at 4.

The 2019 Report initially discussed some of the highlights of the CFPB's financial literacy and financial education work in 2019:

• The CFPB launched its Start Small, Save Up campaign in February 2019 to educate consumers about the importance of savings and to provide consumers with tools to help them reach their personal goals. One of these tools included the CFPB Savings Boot Camp, a multiple email course designed to educate and guide consumers through basic savings concepts. See, 2019 Report at 6.
• The CFPB's Office of Servicemembers Affairs made an online training program, Misadventures in Money Management, available to all future service members. See, 2019 Report at 6. The program is designed to educate servicemembers about financial risks that may arise during the course of a military career.
• The CFPB's Office of Older Americans made its Managing Someone Else's Money guides available for co-branding for credit unions and other stakeholders to share with their customers. See, 2019 Report at 6.

In addition to discussing these efforts, the 2019 Report analyzed the CFPB's financial education strategy and activities by examining three key elements of the CFPB's strategy to meet its mandate to improve consumer financial literacy: providing financial education to the public; sharing research on effective financial education with financial educators; and addressing inclusion and financial security for certain, specifically identified communities.  

Providing financial education. The CFPB provides financial education to consumers in two ways. The CFPB directly offers some resources to consumers. One example of this type of self-help resource available to consumers is the Start Small, Save Up campaign discussed above. The CFPB measured the actual number of people who used the CFPB's educational resources on the internet and in print versus the target goals established by the CFPB. The usage of CFPB financial literacy resources surpassed the CFPB's target (12.3 million versus 8.0 million), but actual consumer satisfaction related to the resources used fell below the CFPB's target. See, 2019 Report at 15. For 2019, the CFPB had set a goal of having 85% of consumers who used its educational resources rate questions and related answers as helpful. See, 2019 Report at 15. Only 80% of consumer-respondents, however, rated the materials used as helpful. See, 2019 Report at 15.

The CFPB also "works to make it easier for people to access financial education in their local communities." See, 2019 Report at 15. The CFPB does this by working with community partners to integrate financial education into established community channels. The community channels used by the CFPB to accomplish this include "libraries, workplaces, social service organizations, military recruiters, Army Reserve Officer Training Corps (ROTC) host colleges and universities, government agencies, financial institutions, and financial educators." See, 2019 Report at 15. The Misadventures in Money Management program discussed above is one example of the CFPB's efforts to work with community partners to deliver financial education to affected consumers. With respect to providing financial education through community channels, the data gathered by the CFPB suggests that the CFPB is hitting some of its targets but not all of them. For example, the CFPB set a goal of having 15 percent of servicemembers who accessed the Misadventures in Money Management program show an increase in financial literacy in one or more topics, and the data evidenced that 19 percent of servicemembers improved their financial literacy. See, 2019 Report at 19.  On the other hand, a four-year financial coaching initiative that ended in March 2019 targeted reaching  out to 3,000 consumers but only served 2,380 consumers. See, 2019 Report at 20.  

Sharing research on financial education. The CFPB noted that "[f]inancial education's overall goal is to improve financial well-being by helping people make better-informed financial decisions and take financial steps to achieve their own life goals." See, 2019 Report at 21. This requires understanding what affects a consumer's financial well-being and how financial education can help consumers achieve their financial goals. See, 2019 Report at 21. The CFPB has previously defined financial well-being and specified certain factors that may be affected by financial education. See, 2019 Report at 21-22. Much of the research released by the CFPB in 2019 (e.g., Financial Well-Being of Older Americans, Financial Well-Being of Veterans, etc.) followed up its work that defined financial well-being in general terms.

The CFPB explained that it shares its research through different channels. The CFPB uses the Financial Education Exchange to share research and information with adult financial educators so that those educators can disseminate that information to adult consumers. See, 2019 Report at 24. To ensure that children can develop the skills they need to achieve financial well-being later in life, the CFPB provides teachers with research and tools to introduce financial education into classrooms. In 2019, the CFPB built upon a platform that was launched the previous year to facilitate financial education for K-12 students. See, 2019 Report at 26.

Addressing inclusion and financial security of certain, specified populations. The final section of the 2019 Report examined the CFPB's efforts around inclusion and financial security for servicemembers, older Americans, students, and traditionally underserved communities. See, 2019 Report at 28. Some of the CFPB's more notable efforts include:

• Navigating the Military Financial Lifecycle resources. The CFPB "offers a web page and related materials that provide targeted information and links to [CFPB] tools that help military consumers address the financial challenges that arise at the various stages of their military lives." See, 2019 Report at 29.
• Elder fraud prevention. During 2019, the CFPB worked with stakeholders to help them plan or build elder financial protection and response networks in certain areas across the United States. See, 2019 Report at 30. These networks are created to permit law enforcement, financial institutions, and adult protective services to protect older Americans from financial exploitation. See, 2019 Report at 30.
• Enhancing access to credit for credit invisibles. "'Credit invisibles' refers to the 26 million consumers who do not have a credit history with one of the nationwide credit reporting companies." See, 2019 Report at 31. In 2019, the CFPB worked with officials from Atlanta, GA; St. Louis, MO; Shawnee, OK; and Klamath Falls, OR as those municipalities developed initiatives designed to address this issue by helping "consumers improve their credit profile and manage credit responsibly." See, 2019 Report at 31.

While the 2019 Report examines the CFPB's financial literacy and financial education efforts, the 2019 Report may be useful for credit unions to think about steps they can take to improve the financial literacy of their members and to help promote thrift among their members. For example, credit unions may want to consider whether they want to use some of the CFPB's co-branded educational materials. Credit unions may also want to think about whether some of the CFPB's strategies for disseminating financial literacy and financial education materials may work for the credit union (e.g., working with other community stakeholders to address areas of concern).