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Research

Promoting saving at tax time

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Imagine receiving a sum of money greater than your normal paycheck. What would you do with the money? Your first impulse might be to spend it. A gourmet dinner or a new television sounds nice. But, you may have bills that need to be paid first. There’s also the option to save some of the money – perhaps to get you closer to a financial goal, such as paying for college or going on a vacation, or to help you gain peace of mind for a rainy day.

At tax time, many consumers face this realistic choice, especially low to moderate income consumers who qualify for the earned income tax credit (EITC), which provides many of them with a tax refund.

Today, we’re announcing that as part of Project Catalyst, we’ll be working with H&R Block to evaluate practices to promote consumer saving behavior during tax time.

Saving for goals and stability

We want to promote saving behavior both because it can help people achieve greater peace of mind when it comes to taking care of unexpected expenses and because it can help people reach their short-term and long-term financial goals. For many people, a tax refund is the largest lump sum payment they will receive in a year. So we believe that tax time is a good time to tell people about the importance of building savings.

We’re already working with Volunteer Income Tax Assistance (VITA) sites through our Ready? Set, Save! campaign to provide consumers with information regarding savings options and to encourage consumers to save a portion of their tax refunds. This project with H&R Block will build on the work we have done with VITA sites. H&R Block is one of the largest tax preparers in the country, preparing over 20 million tax returns annually, and many of its customers have low to moderate incomes. H&R Block will be able to test certain strategies at scale, and the insights shared with us will help us better understand which practices are effective in encouraging consumers to save.

Research goals

Our collaboration with H&R Block will span three tax seasons. We have two main research goals for this project. The first is to find out which strategies are effective at encouraging consumers to save a portion of their tax refunds. The second is to demonstrate the impact and potential benefits of saving on financial health over the short term and long term. H&R Block will begin incorporating information about saving and the options available to consumers in informational materials and marketing campaigns, encouraging saving through their tax preparers in H&R Block stores, and “gamifying” saving to make saving more fun. Through this collaboration, we hope to gain insight from H&R Block’s initiatives to find effective strategies that not only increase overall consumer savings but also help encourage consumers to make saving a habit.

We’ll update you on our progress before we proceed with the second year of the study.

We looked at the impact of regulations at financial institutions

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Today, we’re releasing findings from a study we conducted on the operational effects of certain regulations for banks, in order to better understand the day-to-day activities they perform to comply with regulations.

We chose a narrow scope for the study, in the expectation that depth over breadth would create findings of lasting value. We looked at ongoing operational activities at seven banks, ranging in asset size from under $1 billion to over $100 billion. We focused on how the banks worked to comply with certain regulations that apply to retail checking accounts, savings accounts, debit cards, and overdraft services. Most of the rules for these products have not changed for several years, which made them good candidates for a study of ongoing operational activities.  The rules we examined in the study are Regulations DD (implementing the Truth in Savings Act), E (Electronic Fund Transfer Act), P (Gramm-Leach-Bliley Act financial privacy requirements), V (Fair Credit Reporting Act), and relevant sections of the Fair Credit Reporting Act.

We interviewed about 200 employees and executives at seven participating banks. The interviews focused on identifying all of the banks’ operational activities and processes to comply with the regulations in question.

The case studies revealed that implementation activities among the seven participants were most concentrated in Operations and Information Technology business functions. Human Resources, Compliance, and Retail functions were also impacted more than other operational functions. The study also documents processes and efforts used to implement several common types of regulation, including authorization rights (e.g., “opt-in” vs. “opt-out”), error resolution requirements, disclosure mandates, and advertising standards.

As part of this foundational study, we built tools for investigating compliance activities, which stakeholders may find useful. Both the tools and the findings in the study improve our understanding of regulatory impacts, and may advance the public’s ability to contribute meaningfully to the regulatory process.

Read the report here.

We welcome opportunities to work with interested parties to build on this research and enrich the body of available evidence in this field. We also hope that industry participants and consumer advocates are able to find ways to use our findings and methods to support their own participation in the regulatory process.

Student debt domino effect?

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This morning, Assistant Director for Students Rohit Chopra wrote an op-ed that appeared in Politico about the impact of student debt on the economy:

While many in Washington are focused on what loans look like for future borrowers, there may be a domino effect on the broader economy if we ignore borrowers currently stuck with high student loan payments.

Since the Consumer Financial Protection Bureau highlighted a year ago that student debt had surpassed the $1 trillion threshold, others have warned about the impact on the broader economy. Last year, the Treasury Department’s Office of Financial Research described how student debt might impact demand for mortgage credit. The Federal Reserve Board’s open market committee discussed whether student debt is impacting household spending. And just a few weeks ago, the Financial Stability Oversight Council discussion of student debt in its annual report added to the chorus.

In February, we asked the public to tell us about potential policy options to tackle the problem of unmanageable student debt — particularly private student loans, a market that boomed in the years leading to the financial crisis. We received more than 28,000 submissions from experts and individuals. We heard that high student debt levels might impact everything from homeownership to health care.

We’ve cross-posted the piece on our site, as well. Read the whole thing.

We also published a report on student loan affordability that highlights these issues in more detail.

Releasing complaint data about credit cards, mortgages, student loans, bank accounts, services, and other consumer loans

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What are you going to make with #CFPBdata?

Last summer, we launched our Consumer Complaint Database featuring data about credit card complaints.

Today, based on feedback from the public, we’re expanding it – and increasing the number of complaints from about 19,000 to more than 90,000. Here’s what we’re adding data about:

  • Mortgage complaints submitted since we started taking mortgage complaints on December 1st, 2011.
  • Complaints about bank accounts and services submitted since we started taking them on March 1st, 2012.
  • Private student loan complaints submitted since we started taking them on March 1st, 2012.
  • Complaints about other consumer loans (for example, if you got a loan to finance your daughter’s braces) submitted since we started taking them on March 1st, 2012.
  • More specificity about the product each complaint is about, where provided. For example, instead of just “mortgage,” you can see if the complaint is about a reverse mortgage or a conventional fixed mortgage, etc.

And we’re not satisfied quite yet – more expansions are coming. In the future, we’ll add even more products and improvements to the user experience.

The best part is: You don’t have to wait for us to build what you’d like to see from the data. We’re releasing this data as an API, as well as in CSV, JSON, PDF, RDF, RSS, XLS, XLSX, and XML – and we’d love to see what you can do with it.

From infographics to iPhone apps, we’ve seen people do amazing things with the credit card complaint data that was available before today.

If you think you’ve found something interesting in the consumer complaint data, we want to hear about it.

We encourage the public, including consumers, analysts, data scientists, civic hackers, and companies that serve consumers, to analyze, augment, and build on the information in the database to develop ways for consumers to use the complaint data or mash it up with other public data sets to reveal potential trends.

Share your work, from visualizations to new tools, by tweeting @CFPB using the hashtag #CFPBdata.

The Consumer Complaint Database is just another example of our support for an open-data agenda. Our Project Catalyst team also will be using this data to support innovation in the consumer finance space.

Scott Pluta is the Assistant Director for the Office of Consumer Response at the Consumer Financial Protection Bureau.

p.s. As an example of what can be done with the data, we gave one of our staff a day to play with it in Microsoft Excel. Here’s what she came up with. Her example only goes to March 22, and as with the database itself, the data hasn’t been normalized, meaning that in many cases apples-to-apples comparisons can’t always be made. For example, companies with more customers could be expected to have more complaints. States with more people, likewise, would be expected to have more complaints.

Research updates on private student loans

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Last month, we released a report to Congress with the Department of Education on the private student market. This report helped shed light on how the private student loan market works and where there are opportunities for improvement.

When we design a form or develop a regulation, we work to gather continuous feedback. The same goes for our reports. Since releasing the private student loan report, we’ve been talking to researchers, consumer groups, and industry players to share our results and get feedback. Based on this feedback, we developed ways to make better estimates on certain market statistics, particularly in areas where our data set was incomplete.

While there aren’t any changes to the key findings and recommendations, we released an update today to reflect new methodologies our research team used to calculate some statistics in the report: first, the proportion of private student loan borrowers who exhausted their Federal Stafford Loan options; and second, the extent to which schools certified a borrower’s need for a private student loan.

Compared to the original estimates, the update shows that the number of borrowers who exhausted their federal options is lower than our original estimate, and the level of school certification is higher.

Check out the updates.

Do you have more suggestions about future topics for research on student loans? Share your ideas and tag your story with “student loans.”