Thank you and I am glad the Commission is focusing on post-secondary education and financial inclusion, each of which affects the financial well-being of millions of Americans. Today I will talk about some of the ways the Consumer Bureau is working to help young people and their families make more informed decisions about paying for college and manage their money while in college. I will also touch on the Bureau’s role in promoting financial inclusion.
The Consumer Bureau is concerned about the financial challenges many families face as they consider how to pay for post-secondary education of all kinds, and we are striving to promote and enforce transparency in the financial market place. When a consumer is confronted with a major financial decision, such as figuring out how to pay for college, it is important that all the costs are presented in terms that are easy to understand.
Unfortunately, we have found that many prospective, current, and former students struggle to understand the true costs of their options for financing an education, which is why we developed our “Paying for College” set of tools, building on the Financial Aid Shopping Sheet project we had developed with the Department of Education. It is a set of online resources, written in plain language and 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 or how onerous it would be to repay prospective debt loads over time.
A persistent concern is the marketing of banking products to students on college campuses across the country. In December, the Consumer Bureau sent warning letters to 17 colleges directing them to improve their public disclosure of school-sponsored credit card agreements. Our investigation found that these schools failed to make their marketing agreements reasonably available to the public, as required by law.
We also are reviewing other types of banking arrangements in place at colleges and universities. In doing this work, we found that nearly half of college students attend a school that has made a deal with a financial institution where the school is paid to promote a co-branded debit or prepaid card. Many schools reach agreements with financial institutions using a transparent competitive bidding process. Others may find it challenging to compare proposals because they lack clear information on the benefits or drawbacks of specific account features and fees.
To help schools develop partnerships to provide on-campus or co-branded banking products that are more consumer-friendly, the Bureau released the Safe Student Account Toolkit. It provides specific provisions and criteria that schools can use to compare different product features and evaluate which might better serve their students.
Going forward, we urge schools to consider using the toolkit as an essential resource to help them approach such agreements with financial institutions. Every school should conduct its due diligence before entering into a sponsorship with a financial institution. The toolkit can help colleges easily determine which accounts have certain minimum protections that their students deserve. We also applaud the Department of Education for adopting measures to require protections for accounts marketed by vendors through the financial aid process. Students arrive on campus each fall to learn, not to be targeted for maximizing profits.
The Consumer Bureau is also playing a role in promoting greater financial inclusion, given that relatively high numbers of Americans – more than 68 million – are financially underserved. In November, we took part in a forum on financial inclusion convened by the Department of the Treasury and the U.S. Agency for International Aid Development. We heard from leaders across the country and around the world who discussed the pressing need to provide safe and affordable financial products to those living either partially or entirely outside the formal financial sector. For those who have difficulty navigating the financial marketplace, often with limited financial resources, even small financial missteps or surprises can have huge negative consequences.
In an effort to help more people build financial capability in order to reach their own life goals, the Consumer Bureau has been developing a number of resources to reach consumers as they are already receiving or obtaining other types of services. In a number of communities, we are engaging directly with front-line staff of nonprofit and public social services programs. Their clients already know and trust them, and in many cases, they already share financial information with those they serve. We developed the “Your Money, Your Goals” toolkit to help them assist their clients in addressing financial challenges like budgeting, debt, and credit. To date, our trainings have already reached more than 8,000 staff serving over 150,000 clients. In the coming months, we will provide “Your Money, Your Goals” toolkits, training, and technical assistance to twenty more organizations across the country. Through this initiative, we are expecting to train 15,000 more front-line staff this year with the potential to serve 400,000 more consumers.
One key factor that helps individuals reach their financial goals and weather financial setbacks is having some amount of savings. Yet saving money is hard for many consumers, especially those living paycheck to paycheck. Over 70 million Americans report having no emergency savings. As we approach the upcoming tax season, we know that a tax refund may be the single biggest check some consumers will receive all year. The refund is a good opportunity for individuals to pay down high-cost debt or set aside even a small amount of savings to help reach their financial goals. To promote tax time savings, the Bureau provides information and training to those who staff the Volunteer Income Tax Assistance sites. These resources include trainings, webinars, promotional materials and taxpayer tools. This year, in addition to promoting these resources, we will also be actively promoting Treasury’s great new myRA product, which is a simple, safe, no-fee retirement savings option for people.
Savings is just one dimension where personal finances are a source of stress rather than a source of well-being. According to recent research, only half of Americans report feeling financially secure; the rest describe routinely struggling with a broad range of money management issues.
Research has also shown us financial education strategies that can help. For example, states that implement rigorous high school financial education requirements are associated with higher credit scores and lower delinquency rates for young adults who take part in these programs. Another study commissioned by the CFPB found causal evidence of the benefits of financial coaching programs for lower-income consumers across a range of outcomes, including savings, debt, credit scores, and financial stress.
Another promising way to help consumers improve their financial well-being is through programs in the workplace. The workplace is where most Americans make critical decisions about how to allocate their wages to current needs, savings, investing, and important life goals. For many, it is the primary place, if not the only place, they may ever receive any financial education. We have been encouraged in recent meetings with financial service providers like SunTrust Bank and Deloitte to learn about exciting new programs they are developing to pursue financial fitness among their own workforces.
There is also a growing business case for such programs. Research shows that employees who receive effective financial education are more engaged and have lower turnover. Fully eighty percent of employees say that financial problems hurt their productivity, which can be improved if their employers help them better manage their money to reach major life milestones. This is a current focus at the Consumer Bureau and other agencies, and we look forward to continued engagement with employers on initiatives to promote financial well-being in the workplace.
Through a coordinated effort we are working to reach consumers where they are, be it in schools, colleges, communities, or the workplace. Every part of society – families, schools, government, employers, and financial providers – all can help boost people’s financial capability. Working together, we can help consumers from all walks of life attain greater financial well-being.
For more information about these initiatives, please visit our website at consumerfinance.gov. We look forward to hearing from our distinguished panels on leading practices in post-secondary education and further thoughts to build on last year’s forum on financial inclusion. Thank you.
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 www.consumerfinance.gov.