Prepared Remarks of CFPB Director Richard Cordray at the AAFCS Conference
Thank you, Susan, for your kind introduction. And thank you to the American Association of Family and Consumer Sciences for inviting me to speak at your conference. Most of you would not know it, but Susan and I have known each other for many years, dating back to our days working on financial education together in central Ohio – me as a county treasurer and she as a key figure in the OSU Extension program. Now look how far we have come! Perhaps needless to add, promoting financial capability in people of all ages has become a special passion for me over the years since then. On the local, state, and federal levels I have steadfastly advocated for the importance of providing financial education and resources to help people achieve their financial goals. It is a happy occasion to be here amongst others who share that same passion.
The Consumer Financial Protection Bureau opened its doors less than six years ago. Our mission is to stand on the side of consumers and ensure they are treated fairly in the financial marketplace. Through fair rules, consistent oversight, appropriate law enforcement, and broad-based consumer engagement, we are working to restore trust and confidence in the markets for household financial products and services. We are here to make sure that the problems that upended our economy just a few short years ago and hurt so many consumers do not ever happen again. We also have the responsibility to foresee and forestall new problems that could arise in the future. And we aim to help people better understand and navigate the biggest financial decisions in their lives, such as borrowing to own a home, pay for college, or even buy a car.
Over the past six years, we have consistently gotten results. Our actions have resulted in nearly $12 billion in relief for 29 million consumers and we have imposed $600 million in civil penalties against companies that violated the law. We put in place strong safeguards against reckless mortgage practices that led to the financial crisis that hurt millions of people. And we are giving consumers a voice, so they can address their own concerns and report on broader patterns of problems. These are just some of the ways we are standing up for consumers.
A central part of the financial reform law that created the Consumer Bureau mandates that we are to find ways to help empower consumers to make better informed financial decisions. Today I will first discuss the work we are doing to build financial capability, starting from a young age. Second, I will talk about the steps we are taking to better understand financial well-being and support financial capability for everyone. Finally, I want to highlight the high-quality tools the Bureau is now making available for consumers to empower them and enable them to make sound choices when faced with important financial decisions.
For consumers of all ages, the challenges to achieving financial capability can be complex, varied, and significant. To overcome these hurdles, we must start where good education always starts – with our children. We all know that what we learn in school can inform and influence us for the rest of our lives. That may seem obvious enough to everyone here. Yet we must recognize that this country has not done a very good job of providing financial education in our schools. In our society, financial education should be as fundamental as the education we all receive in mathematics and the language arts.
The recently released Program for International Student Assessment (PISA) results make comparisons across many countries on subjects like financial education. They show the serious need for improved youth financial education in the United States. We have not made the kind of improvement we hoped for in the three years from the last PISA assessment to this latest assessment, but there are some bright spots. For example, about two out of three U.S. teens said they discuss money matters with their parents weekly or monthly. In most of the countries that took part, students who spoke with their parents about money matters tended to do better than those who did not.
Our research has identified a number of important elements to building financial capability in young people, both in school and outside the classroom. When parents support the growth of what is called “executive function” at an early age, children are more likely to have an easier time making plans, focusing, remembering details, and juggling multiple tasks. These skills can enhance their ability to learn how to manage money and make financial decisions. As our children get older, encouraging positive financial habits and explaining day-to-day financial decisions made within the family allows them to have a better concept of how money works in real life. By the time they are in high school and looking toward adulthood, our students can benefit enormously from a stand-alone course on personal finance. Here it is noteworthy that researchers have looked at the credit outcomes of young adults who had taken a personal finance course in high school and compared them to those of young adults in similar states with less rigorous financial education. They found that students who had taken a personal finance course had higher credit scores and less likelihood of delinquency later in life.
Implementing a strategy to boost youth financial capability requires broad support. We are advancing this shared effort through several initiatives involving parents, teachers, financial education practitioners, and youth employment programs. We are doing this in three ways. First, we are offering resources and information to parents and financial education providers through our “Financial Education Exchange” and our online “Money as You Grow” resources. Second, we are encouraging schools all over the country to integrate financial literacy into the curriculum at every grade level by highlighting case studies and promising practices through our “Resource Guide to Advance K-12 Financial Education.” Third, we are supporting financial educators through foundational research. As we continue to collaborate and coordinate our efforts to advance youth financial education, I am confident we will see a new generation that is more empowered and more confident as they navigate the financial marketplace.
The work we are doing to help young people become more financially capable must also be reinforced in adulthood. So to help consumers of all ages, we are studying people’s financial habits, the role of money in people’s lives, and how consumers view financial well-being. To complement this research, we have distributed resources and engaged in field work, partnering with coaches and practitioners on various initiatives aimed at improving the financial lives of their clients.
A growing consensus is emerging that the ultimate measure of success for financial literacy efforts should be improvement in individual financial well-being. In 2015, for the first time ever, the Consumer Bureau provided a conceptual framework to help measure success in financial education by creating a definition of financial well-being. To develop this definition, we went to consumers and those who work directly with consumers to identify specific types of knowledge, behavior, and personal traits that help people achieve greater financial well-being.
Based on their responses, we came up with four elements of financial well-being. They are: feeling in control of their day-to-day and month-to-month finances; being able to absorb a financial shock; having a sense that they are on track to meet their financial goals; and having the financial freedom to make the personal choices that allow one to enjoy life. Based on these four elements, we have released a set of 10 questions that operate as a “scale” to measure financial well-being. The scale is designed to allow practitioners and researchers to accurately and consistently quantify, and therefore observe, something that is not directly observable. And that something is the extent to which a person’s financial situation and the financial capability they have developed provide them with financial security and freedom of choice.
Building on our research into financial well-being, we have further distilled certain principles, or underlying factors, that can be put into practice through financial education aimed at adults. After getting extensive feedback from experts in the field and financial education practitioners, we released a report describing the most essential elements that make financial education effective for practitioners as they work with their clients. The five key principles outlined in the report are: know the individuals and families to be served; provide actionable, relevant, and timely information; improve key financial skills; build on motivation; and make it easy to make good decisions and follow through.
The principles I just mentioned can help guide a practitioner’s work. For example, you might use the principles as a checklist to identify how your program helps advance a person’s financial well-being. You might compare the principles to your program’s focus and decide to incorporate new insights. Or you might seek out complementary programs to fill any gaps you may identify.
To aid in these efforts, the Consumer Bureau is providing toolkits and training for practitioners in the field to better serve their clients. Our “Your Money Your Goals” toolkit provides training to social service providers in order to address financial issues that can hinder their clients from using their services successfully. Nationwide, over 17,000 frontline staff have now been trained to use the toolkit to help hundreds of thousands of consumers help themselves. For caregivers and others working with older consumers, we have created the “Managing Someone Else’s Money” guides. These plain-language guides are designed to help caregivers carry out their duties and responsibilities in managing someone else’s money. So far over one million copies of “Managing Someone Else’s Money” have been distributed across the country.
Through our financial coaching initiative, we partnered with organizations to place 60 certified financial coaches at sites around the country to provide one-on-one service to help consumers identify and work toward their financial goals. This program helps veterans and economically vulnerable consumers assess their financial situations and craft plans to build better financial lives for themselves and their families.
The Consumer Bureau has also created a number of tools that are designed to assist consumers as they interact with financial products and services. We want you to be aware of these excellent tools and help us get them into the hands of consumers. They can only make a difference if people have them and use them.
One of our signature projects designed to empower consumers has been our “Know Before You Owe” effort to make information about financial products more understandable and more accessible. Consumers have closed on more than 11 million mortgages since our Know Before You Owe mortgage rules, with their streamlined application and closing forms, went into effect in October 2015. These forms provide clearer disclosures that have helped consumers understand their options, choose the best deal, and avoid costly surprises at the closing table. For young people and their families facing important decisions about how to go about financing a college education, we worked with the Department of Education to develop the Know Before You Owe financial aid shopping sheet. The shopping sheet, which has been voluntarily adopted by more than 3,400 colleges, provides college-bound students with simple, common-sense disclosures that explain the total cost of attendance, factoring in all relevant considerations. Likewise, our “Know Before You Owe” auto loan shopping sheet helps consumers see the total cost of a loan and make apples-to-apples comparisons among available loan products.
In addition to our Know Before You Owe disclosures, we have created tools written in plain language to help consumers navigate the complexities of financial decision-making. Our “Owning a Home” suite of tools helps prospective homebuyers through all stages of the mortgage process. It provides resources to help people get financially prepared, understand and compare loan offers, and sort through the paperwork. Our “Paying for College” set of tools is designed to help young people and their families assess the costs and risks of financing their education. It offers a school-specific cost calculator and insights into matters such as the differences between grants and loans while providing more specifics about how onerous it would be to repay prospective debt loads over time. Our “Planning for Retirement” tool helps consumers understand that they have major choices to make about when to claim their Social Security retirement benefits. It allows consumers to estimate how much money they can expect to receive at different ages and provides tips to help consumers evaluate the trade-offs that they face.
Another valuable resource we provide is the ability for consumers to submit a complaint to us if they have a problem with a product or service in the consumer financial marketplace. By submitting a complaint, consumers can address their own issues, make their voices heard, and help inform us about how we should prioritize our work to protect others against similar problems. In appropriate cases, we are able to get people some monetary relief; in other cases, they may get other types of help, such as an error fixed on their credit report or relief from harassing debt collectors. Our Consumer Complaint Database, which is the nation’s largest public collection of such information, reflects what consumers are complaining about and why, and how companies are responding. Consumers, industry, and researchers alike can search our database by company name or financial product. This data can be aggregated and downloaded, and generally is updated daily.
The complaints and stories we receive are our direct line to people at their kitchen tables all across America who are struggling with some financial issue or other and may be at their wit’s end about where they can turn for help. They tell us personal stories of real pain – and they remind us every day why we do what we do, and inspire us to keep moving forward. Consumers can submit a complaint online at consumerfinance.gov or by calling our toll-free number to speak with our very helpful consumer response team at (855) 411-CFPB (2372). If people just want to share an experience – either positive or negative – they can use our online “Tell Your Story” feature to do so.
The resources I have touched on today are just a few of those we have to offer. On our website at consumerfinance.gov, you can find more than one thousand answers to frequently asked questions about consumer financial issues through our “Ask CFPB” feature. You can view our Spanish language website, learn how to prevent financial fraud against the elderly, find out about options when it comes to student loan debt, see new remittance rights, and much more. We believe these tools and resources can empower consumers with the confidence, knowledge, and ability to approach financial decisions capably and make choices that will benefit them in sustainable and lasting ways.
Through efforts such as these and our collaborations with people like you, we are reaching out to consumers wherever we find them – be it at home, in schools, amidst the community, or in the workplace. Every part of society – families, schools, government, employers, financial providers, and many others – has some role to play in boosting people’s financial capability. Through our work together, we can help consumers from all walks of life attain greater financial well-being and peace of mind.
When we look out over this vast country and its 320 million residents, we realize that it will take all of us, and then some, to make a lasting difference in the financial lives of consumers. Join us in this work, and help us move consumers closer to having their money choices serve their life goals. Thank you.
The Consumer Financial Protection Bureau (CFPB) 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 www.consumerfinance.gov.