JULY 2013
Financial Literacy
Annual Report
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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013
Message from
Richard Cordray
Director of the CFPB
On July 21, 2011, the Consumer Financial Protection Bureau was launched as the first federal
government agency solely dedicated to consumer financial protection. The Dodd-Frank Wall
Street Reform and Consumer Protection Act mandated that the Bureau develop and implement
a strategy to improve the financial literacy of consumers and initiatives to educate and empower
consumers to make better informed financial decisions. The Bureau is pleased to provide this
report describing the Bureau’s strategy and the financial literacy activities it has undertaken
during its first two years of operation.
In the past few years, America has been working through the aftermath of the worst financial
crisis since the Great Depression. There were many causes of the crisis. But the problems
experienced by many Americans were exacerbated by the growing complexity of the financial
marketplace and of the decisions consumers must make to manage their finances effectively.
The mission of the Consumer Financial Protection Bureau is to make markets for consumer
financial products and services work for consumers by making rules more effective, by
consistently and fairly enforcing those rules, and by empowering consumers to take more
control over their economic lives. Empowering people to take more control over their economic
lives is absolutely essential to our mission. But consumers should not have to go it alone,
without ready access to a trusted source of impartial and expert information about matters of
consumer finance. The 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. We want consumers of all ages and life situations to have the
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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013
opportunities and resources to improve their financial capability so they are able to navigate the
financial marketplace effectively and achieve their own financial goals. To achieve that end, we
have made financial education a critical component of our work, and we are committed to
helping consumers increase their capability to make sound financial choices.
The CFPB is uniquely positioned to help bridge the gap between people’s current levels of
financial capability and the increasingly complex financial decisions they have to make. The
CFPB’s financial education agenda is focused on providing consumers with tools and
information to develop practical skills and support sound financial decision making. These
include tailored approaches to address financial decision-making circumstances for specific
populations, including: servicemembers and veterans; students and young adults; older
Americans; and low-income and economically vulnerable Americans.
The Bureau’s strategy to increase consumers’ financial literacy and capability includes
foundational research, collaborative education initiatives with stakeholders who can reach
consumers where they are, and providing tools and information directly to the public to help
them navigate the financial choices they face. Our research program is helping us to identify,
highlight, and spread effective approaches to financial education. We are working with a broad
range of partners to provide decision-making supports in moments when consumers are most
receptive to receiving information and developing financial decision-making skills. We are also
helping consumers directly by providing innovative tools and information online, including
resources like Ask CFPB, which provides nearly 1,000 questions and answers about financial
products and services at consumerfinance.gov/askcfpb/.
We all have a part to play in building a nation where every consumer is financially capable. We
need to sustain a national conversation about household financial issues, not just in the financial services marketplace, but throughout our communities, including in our families, schools,
workplaces, and places of worship. Parents can and should talk to their children about money
and how to make sound money choices. Schools must do more to teach key financial concepts
and decision-making skills. Public and private employers can invest in a financially fit workplace
– with benefits to both employees and employers – as we are doing at the CFPB. Places of
worship can provide a safe setting for people who are struggling in their lives to seek guidance
and direction about how to make responsible financial decisions that are sustainable over time.
As the American economy continues to recover, we want consumers to be able to look ahead
with renewed hope and resilience. By working in coordination with all those who are dedicated
to achieving these goals, we can enhance the financial capability of everyone in America. Money
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decisions should support the hopes, dreams, and life goals of individuals and families. It takes
both a financially capable populace and a well-policed marketplace to achieve that end. This
report shows the progress the Bureau has contributed toward that national goal in our first two
years. As we move forward, this important work will benefit consumers, strengthen the
economy, and foster a brighter future for our country.
Sincerely,
Richard Cordray
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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013
Table of contents
Message from Richard Cordray ................................................................................ 3
Executive summary .................................................................................................... 8
1. Introduction ........................................................................................................ 13
1.1 Financial education mandate: educate and empower consumers to
make better informed financial decisions .............................................. 14
1.2 Special population offices and the Office of Consumer Engagement .... 15
1.3 Financial education efforts across the Bureau ....................................... 18
2. Financial literacy strategy ................................................................................. 21
2.1 The need for financial literacy and capability ........................................ 21
2.2 The Bureau’s financial literacy strategy ................................................. 22
2.3 Consultation with FLEC and alignment with the National Strategy..... 25
3. Financial education initiatives: developing financial capability .................... 27
3.1 Bureau tools and resources .................................................................... 28
3.2 Collaborative initiatives ......................................................................... 33
4. Research and innovation: identifying what works .......................................... 44
4.1 Financial education evaluation project ................................................. 46
4.2 Measuring financial well-being ............................................................... 47
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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013
4.3 Building financial capability through product design and program
delivery ................................................................................................... 48
4.4 Innovation pilots project ........................................................................ 48
5. Outreach: sharing information and forging relationships to reach
consumers .......................................................................................................... 50
5.1 Financial education ................................................................................. 51
5.2 Servicemembers ......................................................................................53
5.3 Students .................................................................................................. 54
5.4 Older Americans ...................................................................................... 55
5.5 Traditionally underserved consumers ................................................... 56
6. Conclusion ......................................................................................................... 58
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Executive summary
The recent economic downturn raised awareness about the complexity of both our financial
marketplace and the decisions consumers must make to manage their finances effectively.
Despite the availability of a wide range of information about managing money and about
financial products and services, many consumers still struggle to make the financial decisions
that serve their life goals. The Bureau hears every day from people experiencing difficulty in
their financial lives, who often express regret that they did not know more about the risks
involved in particular financial decisions at the time
they made those decisions.
The Dodd-Frank Wall Street Reform and Consumer
The Bureau hears every day
Protection Act mandates that the Bureau work to
from people experiencing
improve the financial literacy of American consumers.
difficulty in their financial lives.
In its first two years, the Bureau has developed a
strategy and a broad range of initiatives to help consumers make informed financial decisions to
meet their own life goals. Broadly, this strategy recognizes that financial literacy, or financial
capability, requires more than simply providing consumers with more information. Being able
to manage one’s financial life and make the financial decisions that will serve one’s life goals
requires a combination of knowledge, skills, and action. For that reason, the Bureau has pursued
a strategy that focuses on identifying how, where, when, and through whom we can provide
assistance to consumers for maximum benefit, and developing and implementing initiatives to
carry out the approaches we identify.
There are three dimensions of the Bureau’s strategy to improve financial literacy. First, we are
seeking to provide assistance to consumers at specific important points in their financial lives.
Second, we are engaged in research to identify effective approaches to financial education and to
better define the metrics for success in financial education. Finally, we are engaged in significant ongoing outreach to a broad range of stakeholders who can assist us in reaching the public and
fine-tuning our approaches.
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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013
The Bureau’s financial education strategy focuses on identifying opportune moments to engage
consumers about their financial decisions and providing information, tools, or other decision-
making supports to help with those decisions. The Bureau is targeting its direct-to-consumer
educational tools and resources towards assisting consumers with the financial aspects of large
life decisions, such as going to college, retiring, or buying a home; and on smaller decisions that can have large life consequences, such as starting a habit of savings, managing debt, and passing
along financial life skills to one’s children.
We are aiming to provide consumers with financial decision-making resources and skills that
will serve them today and in the future. We place a significant focus on answering the questions
that members of the public pose to the Bureau. We are working to engage the public directly,
while also collaborating with stakeholders and using existing service delivery channels. We are
working to address financial decision-making issues that affect consumers generally, and also
issues that affect specific populations – servicemembers, students, older Americans, and
traditionally underserved consumers.
As a data-driven agency, the Bureau believes that evidence-based research is a necessary
underpinning to improving the effectiveness of financial education initiatives. The Bureau has
developed and implemented a financial education research program that focuses on (1)
determining how to measure financial well-being and identifying the knowledge, skills, and
habits associated with financially capable consumers, (2) evaluating the effectiveness of existing
approaches to improving financial capability, and (3) developing and evaluating new
approaches. The Bureau will use the results of this research to inform its financial education
work. We will also share the results widely with other government agencies, financial education
practitioners, and other stakeholders who will be able to look to the Bureau’s research findings
to develop policies and programs that lead to better financial outcomes for American
consumers.
Finally, in order to develop and hone approaches that are effective, the Bureau is engaging in a
rich and ongoing dialogue with consumers and other stakeholders to share information and
learn about promising practices. Stakeholder organizations include financial education
providers; federal, state, and local government agencies; financial institutions; and various other private and non-profit organizations. This outreach work both informs our strategy on an
ongoing basis and enables us to forge meaningful and productive relationships with a network of
organizations that will be essential conduits to reach and assist the public.
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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013
HIGHLIGHTS OF EDUCATION INITIATIVES
The CFPB, acting primarily through our Division of Consumer Education and Engagement, has
undertaken a broad array of education initiatives in the last two years to implement its financial
literacy strategy. Here are some highlights of these initiatives.
CFPB tools and information to assist consumers directly in making financial decisions:
Ask CFPB (consumerfinance.gov/askcfpb/) is an interactive online tool that gives consumers answers to almost 1,000 questions about financial products and services,
including credit cards, mortgages, student loans, bank accounts, credit reports, payday
loans, and debt collection.
Paying for College (consumerfinance.gov/paying-for-college/) is a suite of online tools for students and families evaluating their higher education financing options when
comparing college costs, shopping for financial aid, and assessing repayment options.
CFPB en Español (consumerfinance.gov/es/) makes CFPB resources available in Spanish.
Initiatives through community institutions:
Schools provide the opportunity to transform the financial lives of a generation of
Americans by introducing key money and finance-related concepts early, and building on
that foundation consistently through the K-12 school years. The Bureau has launched a
K-12 initiative to build on existing efforts to integrate financial education into K-12
curricula, and to facilitate appropriate teacher training.
Workplaces, including the federal government, can play an important role in promoting
positive saving and investing habits for their employees. The Bureau is developing an
empirically-based workplace financial education program, which we will share with
other federal agencies, as well as with state and local governments and private sector
employers.
Faith communities and other neighborhood organizations often serve as first responders
in times of financial crisis for American families. The Bureau is working to inform these
organizations about CFPB resources and plans to offer financial capability training to
them, to enhance their ability to assist their members.
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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013
Collaborations with other government agencies and other organizations with existing service
delivery programs or consumer relationships:
Volunteer Income Tax Assistance (VITA) sites provide assistance to millions of low-
income consumers each year in preparing their tax filings and applying for their Earned
Income Tax Credit (EITC) refund. The Bureau has provided materials to VITA sites to
use to encourage consumers to pre-commit to saving a portion of their EITC refund at
the time they learn the amount of their refund.
We are developing a toolkit for front-line staff in social service organizations to help
them incorporate money management and financial literacy information and tools into
their work with their clients. This toolkit should be useful in job training programs and
other types of social services for individuals for whom financial problems may be
interwoven with other types of problems for which they are seeking assistance from a
social service agency.
In coordination with the Department of Defense, we developed financial planning
materials to be delivered as a component of an existing DoD program for
servicemembers leaving the military, and are developing a financial education program
for new recruits. These programs are designed to provide servicemembers with targeted
assistance at these crucial junctures.
To enhance protection for older consumers and others who are financially vulnerable, we
are developing how-to guides for “lay fiduciaries” – people who handle financial affairs
for others. We plan to make the guides available through a multitude of channels that are
likely to reach people when they first take on these responsibilities. These channels
include banks and credit unions that help people set up fiduciary bank accounts, elder
law and trusts and estates attorneys who help people establish trusts or powers of
attorney, and state courts that appoint individuals as guardians.
Together with the Federal Deposit Insurance Corporation, we developed a financial
education curriculum, Money Smart for Older Adults (MSOA), as a module in the FDIC’s
Money Smart financial education program. MSOA provides information for older adults
and their caregivers on preventing and responding to financial exploitation. It includes
tips to avoid scams, information about how to guard against identity theft and other
forms of financial exploitation, and resources on how to prepare financially for
unexpected life events and disasters. MSOA will be offered by community organizations
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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013
around the country that interact with older adults, family members, or caregivers.
Participant guides are available for download at
files.consumerfinance.gov/f/201306_cfpb_msoa-participant-guide.pdf, and available for order through promotions.usa.gov/cfpbpubs.html. Community organizations that wish to offer the course in their communities can order the instructor materials from the
FDIC at fdic.gov/consumers/consumer/moneysmart/olderadult.html.
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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013
1. Introduction
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) mandates
that the Director of the Consumer Financial Protection Bureau (CFPB or Bureau) submit a
report, no later than 24 months after the designated transfer date, and annually thereafter, on
the Bureau’s activities and strategy to improve the financial literacy of consumers to the
Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on
Financial Services of the House of Representatives. 1 The Bureau is pleased to submit this inaugural report on the Bureau’s financial literacy work. The report covers the time period from
July 21, 2011, when the Bureau opened its doors, through
June 15, 2013.
The economic crisis that led to passage of the Dodd-
Enhancing financial literacy is
Frank Act demonstrated that national financial stability
an integral part of the Bureau’s
can depend on the financial well-being of individuals and
consumer financial protection
families. The Bureau is the nation’s first federal agency
function.
focused solely on consumer financial protection. Created
by the Dodd-Frank Act, the Bureau’s mission is to help consumer financial markets work for
American consumers, responsible providers, and the economy as a whole,
by making rules more effective;
by consistently and fairly enforcing those rules; and
by empowering consumers to take more control over their economic lives.
1 Consumer Financial Protection Act of 2010, Pub. L. No. 111-203, § 1013(d)(4), 124 Stat. 1955, 1971 (codified at 12
U.S.C. § 5493(d)(4)).
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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013
Enhancing financial literacy is an integral part of the Bureau’s consumer financial protection
function. This mandate is reflected in numerous provisions of the Dodd-Frank Act that charge
the Bureau with researching, developing, promoting, and implementing financial literacy
programs and activities. These include provisions directing the establishment of the Office of
Financial Education (OFE), which is responsible for developing and implementing a strategy
and a broad range of initiatives to provide individuals and families with opportunities to access
information, education, tools, and services to make better informed financial decisions. The
Dodd-Frank Act also mandated the creation of offices or functions addressing special consumer
populations, as described further below.
The Bureau’s financial literacy work is performed chiefly through our Division of Consumer
Education and Engagement (CEE). This division includes the Office of Financial Education, the
Office of Consumer Engagement, which develops the Bureau’s online relationship with
consumers, and the four offices that address issues and needs, including financial education, of
special populations: the Office for Servicemember Affairs, the Office for Students, the Office of
Financial Protection for Older Americans, and the Office of Financial Empowerment, serving
traditionally underserved consumers.
Each of these six offices plays a role in implementing the Bureau’s strategy to provide financial
education and enhance financial literacy and capability. Other parts of the Bureau also
contribute to our financial education mission. For example, the Bureau’s Office of Research is a
CEE partner in the research elements of the Bureau’s financial education strategy. The Bureau’s
Office of Fair Lending and Equal Opportunity and Office of Consumer Response also provide
education to the public. The Bureau’s Know Before You Owe initiatives, as well as many other
financial education initiatives, rely on cross-Bureau subject-matter expertise. The Office of
Community Affairs from the Division of External Affairs works with CEE offices to engage
consumers and organizations through webinars and other public events.
1.1 Financial education mandate: educate
and empower consumers to make better
informed financial decisions
The