Bureau Examines Ways to Encourage Consumers to Use Tax Refunds to Build Savings
WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) announced a Project Catalyst research pilot to explore ways to encourage saving among consumers at tax time. The pilot will focus in particular on tax-time saving practices among low-income consumers in order to help them improve their long-term financial well-being. The initiative will inform work at the Bureau to promote consumer saving and support its mission to empower consumers to lead better financial lives.
“Tax time is an opportunity for many consumers to build savings that can help them meet their financial goals,” said CFPB Director Richard Cordray. “Saving a portion of tax refunds can enable consumers to improve their long-term financial health and place more low-income consumers on a path to economic stability. This project can help us better understand how to encourage tax-time saving.”
The Dodd-Frank Wall Street Reform and Consumer Protection Act mandates that the Bureau work to improve the financial literacy of American consumers. As part of this mandate, the Bureau is charged with providing consumers with wealth-building strategies and access to financial services during the tax preparation process to claim certain credits and federal benefits. These activities are primarily related to working people who have low to moderate incomes. Saving a portion of federal income tax refunds can help prepare consumers to handle financial emergencies or achieve bigger goals, like retirement, college, or a down payment on a house or car.
As part of the CFPB’s Project Catalyst initiative, H&R; Block Inc., one of the nation’s largest tax preparation companies, has agreed to share insights with the Bureau from its tax-time savings project. Through its project, H&R; Block is testing the effectiveness of certain strategies to promote tax-time saving behavior among its customers. These strategies include providing consumers with informational materials to encourage saving a portion of their tax refund and having tax preparers introduce to consumers the idea of saving once they learn they will receive a refund. The information shared by H&R; Block will be de-identified, and appropriate precautions will be taken to ensure that individual consumers cannot be identified through the data.
This effort will inform and expand on the Bureau’s work to encourage tax-time saving. Over the past three years the Bureau has launched a series of initiatives to encourage consumers to save a portion of their tax refund. These efforts include providing informational materials and training to volunteer tax preparers assisting low-income and moderate-income consumers, as well as pilot projects to increase awareness among consumers of available saving options.
The Bureau’s Project Catalyst initiative is designed to encourage consumer-friendly developments in markets for consumer financial products and services. The Bureau views this initiative as an important means of fulfilling its mandate under the Dodd-Frank Wall Street Reform and Consumer Protection Act to provide all consumers access to fair, transparent, competitive, and innovative markets.
More information about Project Catalyst is available at: http://www.consumerfinance.gov/projectcatalyst
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.