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Director Cordray Remarks at the Navigating the Market Press Call

By Richard Cordray

Thank you for joining us on this call. Today we are talking about financial education, which is a topic that I believe is of the utmost importance for the future of our economy and our country. The Consumer Financial Protection Bureau is releasing a study that analyzes the amount of money spent to educate consumers about financial products and, for comparison, the amount spent trying to influence consumers’ decisions about financial products. While it is not surprising that we found that financial education programs are significantly outspent by financial marketing, the gap between the two is nonetheless staggering.

We found that for every $25 spent on financial marketing, only $1 is spent on financial education. That means the majority of information consumers receive about financial products comes from a company trying to sell them something – which can make it quite a challenge for consumers to find unbiased information.

Our study took a yearlong look at financial education spending in the United States. We found that the financial services industry spends approximately $17 billion each year marketing financial products and services to consumers. Meanwhile, only $670 million is spent to educate consumers about financial products. Nonprofits, local, state, and federal governments, and financial institutions all contribute to these education efforts. We also determined that about three-quarters of financial education spending comes from private sources, while only one-quarter comes from public sources.

To examine the multi-billion-dollar financial marketing sector, we analyzed both awareness advertising and direct marketing. Awareness advertising is when a company puts out ads with a general promotional message but not necessarily selling a specific product. Financial institutions spend about $5.5 billion annually on awareness advertising. More than half of that is spent on credit and loan-related products, with a particular focus on credit cards. Other awareness advertising money is spent promoting services like checking accounts and credit counseling.

The remaining $12 billion spent by financial institutions is put towards direct marketing, which has the goal of selling a specific product, like a travel reward credit card or a certain type of savings account. We found that nearly half of direct marketing is done with internet ads. Mailers and television ads were the other two most common forms of direct marketing.

This tells us that consumers are seeing financial marketing everywhere they turn – online, in their mailbox, and in their family room on the television. This is truly a barrage of marketing. By contrast, very little of the money spent on financial education efforts is put towards any type of advertising. It is truly a David and Goliath scenario, which highlights the importance of providing high-quality sources of unbiased financial information to consumers.

At the Consumer Bureau, we believe that the best and most immediate form of consumer protection is self-protection: being able to avoid problems in the first place and to know what you can do about it when you do experience a problem. Our agency is uniquely positioned to help bridge the widening gap between people’s actual financial capability and the increasingly complex financial decisions they have to make in our society.

At the Bureau, we have a team dedicated to improving the financial capability of consumers. We offer financial education resources that can benefit consumers in many different ways – from school-age children to employers that want to promote financial education in the workplace. We also offer Ask CFPB, an interactive, online database that answers consumers’ most frequently asked questions in plain language, to help consumers better understand financial products and services and do their own research. And we have a great set of tools called “Paying for College” that helps young people and their parents understand and navigate their choices and decisions about finding ways to pay for higher education while controlling and managing their student loan debt burdens. You can find these resources at our website, consumerfinance.gov.

Today’s study should serve as a reminder that there is much to be done in this country to help people develop the skills they need to make smart financial choices that they can live with over the long term. We are working hard to do our part to achieve this goal and we welcome the efforts of others to do the same.

Thank you.

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