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JULY 2013

Financial Literacy

Annual Report

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CFPB FINANCIAL LITERACY ANNUAL REPORT, JULY 2013

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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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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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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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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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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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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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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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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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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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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 Bureau’s principal financial literacy mandate is set forth in § 1013(d)(1) of the Dodd-Frank

Act. Section 1013(d)(1) mandated establishment of an Office of Financial Education to “be

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responsible for developing and implementing initiatives intended to educate and empower

consumers to make better informed financial decisions.” 2 Further, the statute directs OFE to

“develop and implement a strategy to improve the financial literacy of consumers that includes

measurable goals and objectives, in consultation with the Financial Literacy and Education

Commission, consistent with the National Strategy for Financial Literacy, through activities

including providing opportunities for consumers to access” various types of information,

education, tools, and services. 3 OFE is also responsible, with the Bureau’s Office of Research, for conducting research related to financial education and counseling. 4

1.2 Special population offices and the Office

of Consumer Engagement

The Dodd-Frank Act also mandated creation of offices to develop financial education and policy

initiatives to support the financial well-being of particular segments of the consumer population.

These offices focus on servicemembers, students, older Americans, and “traditionally

underserved” consumers.

SERVICEMEMBERS

The Dodd-Frank Act mandated the establishment of an Office of Servicemember Affairs to “be

responsible for developing and implementing initiatives for service members and their families,”

including initiatives intended to “educate and empower service members and their families to

make better informed decisions regarding consumer financial products and services.” 5 The Office of Servicemember Affairs works to improve consumer financial protection for

servicemembers, veterans, and their families in a number of ways. The Office partners with the

Department of Defense and the Department of Veterans Affairs to provide opportunities for

2 12 U.S.C. § 5493(d)(1).

3 12 U.S.C. § 5493(d)(2).

4 12 U.S.C. § 5493(d)(3)(B).

5 12 U.S.C. § 5493(e)(1)(A).

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servicemembers, veterans, and their families to receive financial education relevant to their

needs. The Office monitors complaints submitted by servicemembers, veterans, and their

families. The Office coordinates consumer protection efforts among federal and state agencies

related to consumer financial products and services offered to, or used by, military families. 6

STUDENTS

The Dodd-Frank Act directed the Secretary of the Treasury, in consultation with the Bureau’s

Director, to designate a Private Education Loan Ombudsman within the Bureau “to provide

timely assistance to borrowers of private education loans.” 7 The Private Education Loan Ombudsman position is held by the Assistant Director of the Office for Students. The Office for

Students works to enhance the ability of students and younger consumers to make financial

decisions, including monitoring complaints about private student loans, providing information

and tools to help students understand the risks from student loans and other financial products,

and identifying policy and marketplace issues with special impact on students and younger

consumers. 8

OLDER AMERICANS

The Dodd-Frank Act mandated establishment of an Office of Financial Protection for Older

Americans (Office for Older Americans). The functions of the Office for Older Americans include

“activities designed to facilitate the financial literacy of individuals who have attained the age of 62 years or more . . . on protection from unfair, deceptive, and abusive practices and on current

and future financial choices, including through the dissemination of materials to seniors on such

topics.” 9 More specifically, the statute directs the Office for Older Americans to, among other things, (1) develop goals for financial literacy and counseling programs for seniors, including

programs that “help seniors recognize warning signs of unfair, deceptive, or abusive practices”

and “protect themselves from such practices,” and programs that “provide one-on-one financial

6 12 U.S.C. § 5493(e)(1).

7 12 U.S.C. § 5535(a).

8 12 U.S.C. § 5535(c).

9 12 U.S.C. § 5493(g)(1).

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counseling on issues including long-term savings and later-life economic security”; and (2)

“conduct research to identify best practices and effective methods, tools, technology and

strategies to educate and counsel seniors about personal finance management . . ..” 10 The statute also directs the Office for Older Americans to work with community organizations and

other entities that educate and assist older consumers.

TRADITIONALLY UNDERSERVED CONSUMERS

The Dodd-Frank Act mandated establishment of a unit whose functions are to include providing

“information, guidance, and technical assistance regarding the offering and provision of

consumer financial products or services to traditionally underserved consumers and

communities.” 11 The term “traditionally underserved consumers” includes un-banked and under-banked consumers. 12 The Office of Financial Empowerment (Empowerment) directs its efforts towards strengthening financial consumer protection and enhancing the financial

capability of low-income and other economically vulnerable consumers who comprise the

traditionally underserved.

OFFICE OF CONSUMER ENGAGEMENT

The Office of Consumer Engagement (Consumer Engagement) develops resources, information,

and online tools to help consumers make better-informed financial decisions. Consumer

Engagement works to create an interactive, informative relationship between the CFPB and

consumers, and collaborates with offices and divisions across the Bureau on ways to effectively

engage the public. Consumer Engagement approaches this mission with user-centered and data-

driven approaches to public engagement.

10 12 U.S.C. § 5493(g)(3)(A)(i)-(ii); 12 U.S.C. § 5493(g)(3)(D).

11 12 U.S.C. § 5493(b)(2).

12 See 12 U.S.C. § 5493(b)(1)(F).

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1.3 Financial education efforts across the

Bureau

This report principally covers the financial education work performed by the Bureau through the

Division of Consumer Education and Engagement. Financial education is also an important

component of the consumer protection work of Bureau offices within other divisions, such as the

work described below. 13

OFFICE OF CONSUMER RESPONSE

The Office of Consumer Response (Consumer Response), which is part of the Bureau’s

Operations Division, hears directly from consumers about the challenges they face in the

marketplace, brings their concerns to the attention of companies, and assists in addressing their

complaints. 14 Consumer Response is supported by experts from throughout the Bureau who provide subject matter expertise. In addition, the Offices of Servicemember Affairs and Students

help to monitor and address complaints.

Information about consumer complaints is available to the public through the Consumer

Complaint Database. The database is publicly available at

consumerfinance.gov/complaintdatabase/ and serves as an additional informational tool to inform consumer decision making around financial products and services. Consumers can

submit complaints at consumerfinance.gov/complaint/, or by calling 855- 411-CFPB (2372). 15

13 This work is also discussed in other reports to Congress. See, e.g. , Consumer Response Annual Report (Mar. 31, 2012), available at http://files.consumerfinance.gov/f/201204_cfpb_ConsumerResponseAnnualReport.pdf; Fair Lending Report of the Consumer Financial Protection Bureau (Dec. 2012), available at

http://files.consumerfinance.gov/f/201212_cfpb_fair-lending-report.pdf; Annual Report of the Consumer Financial Protection Bureau Pursuant to Section 1017(e)(4) of the Dodd-Frank Act (July 2012) available at

http://files.consumerfinance.gov/f/201207_cfpb_report_annual-to-house-appropriations-committee.pdf.

14 12 U.S.C. § 5493(b)(3); see also 12 U.S.C. § 5511(c)(2).

15 Complaints can also be submitted by mail to Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244, or by fax to 855-237-2392.

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OFFICE OF FAIR LENDING AND EQUAL OPPORTUNITY

The Dodd-Frank Act charges the Office of Fair Lending and Equal Opportunity (Fair Lending),

which is part of the Division of Supervision, Enforcement, and Fair Lending, with “providing

oversight and enforcement of Federal laws intended to ensure the fair, equitable, and

nondiscriminatory access to credit for both individuals and communities that are enforced by

the Bureau . . ..” 16 Among other things, the statute directs Fair Lending to work with “private industry, fair lending, civil rights, consumer and community advocates on the promotion of fair

lending compliance and education . . ..” 17 The Office of Financial Education has collaborated with Fair Lending to promote awareness of federal fair lending laws and help consumers

recognize prohibited practices. In a brochure released in May 2012 called “Credit Discrimination

is Illegal,” the Bureau advises consumers about the Equal Credit Opportunity Act’s protections,

warning signs of discrimination, and how to protect themselves. 18

KNOW BEFORE YOU OWE INITIATIVES

The Bureau seeks to make the costs, risks, and benefits of financial products and services easier

for consumers to understand through a series of initiatives collectively known as Know Before

You Owe. The goal of these projects is to help consumers make better informed choices about

these products and services for themselves and their families. To date, the Bureau has developed

prototype disclosure forms for mortgages, credit cards, and student loans, and in each case

invited the public to tell us what kinds of disclosures may work best, and why. These projects use

interdisciplinary expertise that spans the Bureau – including Regulations attorneys, product

experts, Community Affairs staff, and technology and engagement specialists.

The Bureau’s Know Before You Owe mortgages project has centered on combining the two key

federal mortgage disclosures – the Truth in Lending Disclosure and the HUD-1 Settlement

16 12 U.S.C. § 5493(c)(2)(A).

17 12 U.S.C. § 5493(c)(2)(C).

18 CFPB, Know Your Rights: Credit Discrimination is Illegal, available at

http://files.consumerfinance.gov/f/201212_cfpb_credit-discrimination-brochure.pdf.

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Statement – into a single, easier-to-use form. 19 In the course of the project, the Bureau has received more than 27,000 individual comments from online participants. In the Know Before

You Owe credit cards project, the Bureau has developed a prototype credit card agreement

aimed at making the prices and terms easier for consumers to understand. The Bureau’s Office

for Students, working with other Bureau experts and the U.S. Department of Education, created

the Know Before You Owe student loans project, which is discussed later in this report.

19 See 12 U.S.C. § 5532(f).

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2. Financial literacy strategy

The recent economic downturn raised awareness about the importance of individual financial

capability. Financial products are numerous and complex, requiring individuals to make choices

from an array of options. In addition, there are substantial costs to attaining many significant

life goals, such as owning a home or sending one’s child to college. Further, consumers are

increasingly responsible for saving for and managing the funds for their retirement. In this

context, not having the skills to make sound financial decisions can have severe consequences

for Americans’ abilities to reach their life goals. 20

2.1 The need for financial literacy and

capability

Recent studies provide evidence of specific ways that U.S. consumers could use help in

developing effective habits and skills around money management and personal finances.

According to recently released results of the 2012 National Financial Capability Study, a

majority of American adults say they have not formed a savings cushion to protect them from

unanticipated financial emergencies or to provide for predictable life events such as their

children’s college education or their own retirement. Many Americans also do not comparison

shop before obtaining financial products such as a credit card. Similarly, many American adults

who believe they are adept at dealing with day-to-day financial matters use credit cards in costly

ways, such as paying only the minimum payment each billing cycle, making late payments,

20 FINRA Investor Education Foundation, Financial Capability in the United States: National Survey – Executive Summary (Dec. 2009), at 4, available at

http://www.usfinancialcapability.org/downloads/NFCS_2009_Natl_Exec_Sum.pdf.

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thereby triggering late fees, or using the cards for cash advances and other costly non-bank

borrowing methods.

Financial education literature, as well as input the Bureau has received from financial education

providers and academics, suggests that providing consumers with information is only part of the

solution. 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. Together, these

abilities are known as “financial literacy” or “financial capability.” They include the ability to

analyze the costs, risks and consequences of particular financial services, products, and

decisions, make effective choices and recover from poor ones, know where to go for help, and

take other actions to improve present and long-term financial well-being in an evolving financial

landscape. Financial education experts also consistently suggest that more research is needed to

further determine what financial education approaches are most effective in developing

financial capability, and to further identify meaningful ways to measure financial knowledge,

behavior, and well-being.

2.2 The Bureau’s financial literacy strategy

The Bureau has developed a strategy to improve consumers’ financial capability and help

consumers make informed financial decisions. Broadly, the Bureau’s strategy is to motivate and

support consumers in taking positive action on financial decisions that serve their own life

goals. 21 To this end, the Bureau is focusing on

reaching consumers in those moments when the

The Bureau’s strategy is to provide

consumer is most receptive to learning about a

consumers with relevant information,

financial decision. The Bureau’s approach is to

tools, or other decision-making

provide relevant information, tools, or other

supports in those moments when they

decision-making supports in those moments. The

are most receptive to learning about a

Bureau is focusing on big life decisions, such as

financial decision.

going to college, retiring, or buying a home, and

21 This financial literacy strategy is reflected in Goal 2 of the Bureau’s strategic plan, which is to empower consumers to live better financial lives. See CFPB Strategic Plan FY 2013 – FY 2017, at 16-23, available at

http://www.consumerfinance.gov/strategic-plan/#goal2.

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smaller decisions that can have significant life consequences, such as starting to build an

emergency savings cushion, managing debt, and passing on knowledge and skills in the family

by talking to children about money. The Bureau’s strategy includes reaching consumers directly,

and working with community groups and organizations with existing networks and consumer

relationships to reach people in those moments. The strategy also includes research to identify

ways to enhance the effectiveness of work to improve consumers’ financial capability.

The strategy has three key aspects: education initiatives, research and innovation, and outreach

to key stakeholders who can help to reach the public.

EDUCATION INITIATIVES TO REACH CONSUMERS IN OPPORTUNE MOMENTS

The Bureau seeks opportunities to engage consumers at those moments when they are most

receptive to learning about financial decisions. To this end, the Bureau has developed education

initiatives to engage with consumers in a broad array of times and places – through CFPB tools

and resources that we make available to consumers directly on the Bureau’s website and

elsewhere, through community intermediaries, and through collaborations with other

government agencies and other organizations that offer other means to reach consumers at

opportune moments. We also seek to support financial decisions today in a manner that will

develop and sustain skills for decisions tomorrow. For example, students applying to college can

use the Financial Aid Shopping Sheet, discussed below, to help them compare costs of various

colleges as they decide where to pursue a college education. At the same time, using the

Shopping Sheet for the college decision may develop comparison-shopping skills they can apply

to other major purchases.

The Bureau’s financial education initiatives to date are discussed in Section 3 of this report.

EVIDENCE-BASED RESEARCH AND INNOVATION TO IDENTIFY WHAT WORKS

In order to improve consumers’ capability to make financial decisions to reach their own life

goals, the Bureau seeks to further expand the base of knowledge about what works to achieve

positive financial outcomes, for use by the Bureau and by other providers of financial education.

To this end, the Bureau is conducting evidence-based research to build on current knowledge of

what approaches to financial education are effective and how to measure effectiveness. The

current projects focus 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 decision making and outcomes,

and (3) developing and evaluating new approaches. The Bureau will use the results of this

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research to inform its financial education work, and will also share the results widely with other

government agencies, financial education practitioners, and other stakeholders. In this way, the

Bureau’s research findings can also support development of effective policies and programs by

others involved in financial education.

Our financial education research and innovation work is discussed in Section 4 of this report.

OUTREACH TO SHARE INFORMATION AND DEVELOP APPROACHES AND

COLLABORATIONS TO REACH CONSUMERS

The Bureau is engaging in broad and varied outreach with consumers and other stakeholders to

build relationships, share information and promising practices, and ultimately to reach a larger

portion of the American public with effective financial education resources. The Bureau engages

in dialogue with consumers to understand their needs and to make the Bureau known as a

trusted resource for reliable information and tools. The Bureau also uses outreach to build a

stakeholder network for sharing best practices and information, and to develop relationships

with organizations that can reach consumers. These organizations include financial education

providers, federal, state, and local government agencies, financial service providers, and various

other types of private and non-profit organizations. Through this ongoing dialogue, we inform

our financial education strategy and initiatives, and connect to the network through which we

can reach consumers with targeted and meaningful assistance and information.

The Bureau’s financial education outreach activities are discussed in Section 5 of this report.

2.2.1 Measurable performance goals

The Bureau incorporates measurable performance goals and objectives into its financial

education, research, and outreach initiatives, as it does with all of its work, in order to measure the effectiveness of its efforts. For example, the Bureau tracks metrics on usage of online

resources, such as the number of unique visits and views to areas of the Bureau’s website that

provide consumer tools, information, and assistance. When we offer new resources or materials

through third-party existing programs, we measure the numbers of persons served through the

programs. The Bureau is evaluating additional ways to assess the impact of its financial

education efforts. The Bureau’s financial well-being metrics project, discussed below, will

identify what knowledge and other factors affect financial well-being and how to measure these

factors. We will use the knowledge yielded by this research to promote enhanced financial

education and financial capability work, and further hone and target our own financial

education efforts.

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2.3 Consultation with FLEC and alignment

with the National Strategy

The Bureau’s strategy to improve the financial literacy of consumers has been informed by its

consultations with the Financial Literacy and Education Commission (FLEC or Commission).

Congress established the Commission in 2003 with the mandate to improve the financial

literacy and education of Americans, and to coordinate financial education efforts in the federal

government through, among other things, development of a national strategy to promote

financial literacy and education. 22 The Commission currently comprises 21 federal agencies and the White House Domestic Policy Council. It is chaired by the Secretary of the Treasury, and the

Bureau’s Director serves as Vice-Chair. 23

In addition to its role as Vice-Chair, the Bureau is an active member of the Commission’s

Leadership Committee and work groups. In these capacities and in its own work, the Bureau is

actively engaged in furthering the National Strategy for Financial Literacy (National Strategy)

and FLEC’s current “Starting Early for Financial Success” strategic focus. The Starting Early

strategic focus is intended to serve as a vehicle for achieving coordination of resources and

activities among Commission member agencies, as well as with other levels of government and

the private and non-profit sectors. 24 A number of the Bureau’s activities are aligned with this initiative, including its K-12 initiative, Foundations workplace initiative, and Paying for College tools. In addition, the Bureau’s financial education research initiatives are consistent with the

Commission’s research priorities. 25

22 See Financial Literacy and Education Improvement Act, Pub. L. No. 108-159, Tit. V, § 511, 117 Stat. 2003 (codified at 20 U.S.C. §§ 9701-9709).

23 Consumer Financial Protection Act of 2010, Pub. L. No. 111-203, § 1013(d)(5), (6), 124 Stat. 1955, 1971 (codified at 20 U.S.C. § 9702(c)(1)(C), (d)); see http://www.treasury.gov/resource-center/financial-

education/Pages/commission-index.aspx (last visited June 27, 2013).

24 See Financial Literacy & Education Commission, Minutes of Public Meeting (Oct. 18, 2012), available at

http://www.treasury.gov/resource-center/financial-education/Documents/Minutes%2010%2018%2012.pdf.

25 Financial Literacy & Education Commission, Research Priorities Applied to the 2013-2014 Strategic Focus,

“Starting Early for Financial Success” (May 2013), available at http://www.treasury.gov/resource-

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The Bureau’s strategy also aligns with each of the National Strategy goals for moving the nation

towards the vision of sustained financial well-being for all individuals and families in the United States. 26 The first goal of the National Strategy is to “increase awareness of and access to financial education.” The Bureau’s strategy likewise seeks to provide individuals and families

with access to reliable, clear, timely, relevant, and effective financial information and

educational resources disseminated through many different channels, such as schools,

employers, and financial education providers.

The second goal of the National Strategy is to “determine and integrate core financial

competencies.” Core competencies are basic topic areas in financial management: earning,

spending, saving and investing, borrowing, and protecting against risk. The Bureau’s strategy

includes providing tools and informational resources that develop and enhance consumers’

competency in these basic areas of managing their personal finances.

The third goal of the National Strategy is to “improve financial education infrastructure.” The

Bureau’s strategy relies on developing a broad variety of collaborations with other

governmental, private, and non-profit organizations to reach consumers. These collaborations

will create or build on existing infrastructure for delivering financial education to diverse

constituencies and sharing information.

Goal four of the National Strategy is to “identify, enhance, and share effective practices.” The

Bureau’s strategy is to use evidence-based approaches in its financial education initiatives. In

order to do this, the Bureau is conducting rigorous research and evaluation of financial literacy

and education strategies and metrics, and will share its learning widely. These elements of the

National Strategy are reflected more specifically in the Bureau’s education, research, and

outreach initiatives described below.

center/financial-education/Documents/Starting%20Early%20Research%20Priorities%20May%202013.pdf;

Financial Literacy & Education Commission, Research and Evaluation Working Group, 2012 Research Priorities and Research Questions, available at http://www.treasury.gov/resource-center/financial-

education/Documents/2012%20Research%20Priorities%20-%20May%2012.pdf. Financial Education staff serve on the Commission’s Research and Evaluation Working Group, which has developed these research priorities to coordinate research efforts among the FLEC agencies. The Bureau’s financial education research work is discussed below.

26 See Financial Literacy & Education Commission, Promoting Financial Success in the United States: National Strategy for Financial Literacy 2011, at 8-12, available at http://www.treasury.gov/resource-center/financial-

education/Documents/NationalStrategyBook_12310%20(2).pdf.

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3. Financial education

initiatives: developing

financial capability

The Bureau has developed a broad range of education initiatives to implement its financial

literacy strategy. These initiatives are designed to provide consumers with actionable financial

information and tools at specific important moments in their financial lives, and with

opportunities to develop the skills to navigate the financial marketplace and manage their

financial lives effectively. The Bureau is approaching this task in two ways. First, the Bureau is

engaging consumers directly through interactive tools, social media, a CFPB digital library of

consumer information, and CFPB print publications. Second, the Bureau is reaching consumers

through collaborative initiatives that leverage existing public, private, and non-profit resources

and efforts.

The Bureau’s financial education initiatives are designed

The Bureau has developed

to provide consumers with opportunities to access a

education initiatives to engage

broad range of financial information, tools, services, and

with consumers at specific

other resources to support financial capability. These

important points in their financial

include providing opportunities to access information or

lives.

activities to assist with evaluating credit products such

as mortgages, credit cards, or student loans; preparing for education expenses and other major

purchases; reducing debt and improving the consumer’s financial situation; developing long-

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term savings strategies; saving at the time of income tax filing; and providing opportunities to

access savings, borrowing, and other services found at mainstream financial institutions. 27

3.1 Bureau tools and resources

The Bureau has developed extensive resources to provide consumers directly with impartial

information about the financial marketplace and tools for financial decision making. Highlights

of these initiatives are described below.

3.1.1 Ask CFPB

In March 2012, the Bureau launched Ask CFPB, an

Ask CFPB is an interactive online

interactive online tool that gives consumers

answers to almost 1,000 questions about financial

tool that gives consumers

products and services, including credit cards,

answers to almost 1,000

mortgages, student loans, bank accounts, credit

questions about financial

reports, payday loans, and debt collection. Ask

products and services.

CFPB is available at

consumerfinance.gov/askcfpb/. The Bureau has gradually added product categories to Ask CFPB as it has developed questions and answers to respond to consumer questions or to support

the handling of complaints in those areas. Consumers can navigate Ask CFPB by typing in their

own search words or choosing a financial product category. Consumers can narrow a search to

specific topics, such as “credit report” or “debit card” from any search page. Consumers can also

access information about financial issues applicable to specific populations, such as

servicemembers, students, older Americans, or parents.

The vast majority of consumers access Ask CFPB from Internet search engines. The major

search engines rank Ask CFPB high among the array of consumer financial advice available

online, which is an indicator of its utility to consumers. For example, Google lists Ask CFPB as

the first answer when a consumer searches for “Where can I get my credit score?” Consumers

27 See 12 U.S.C. § 5493(d)(2).

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can also get answers to their questions about these financial products and services by calling the

CFPB toll-free at 855- 411-CFPB (2372).

3.1.2 Consumer Experience Program

PAYING FOR COLLEGE

Paying for College is a suite of online tools targeted to students and families evaluating their

options when financing a higher education. The tools address the entire lifecycle of financing

college, from comparing college costs, to shopping for financial aid, through assessing options to

repay student loan debt after graduation.

Choose a Loan

Choose a Loan is an interactive guide designed to

Paying for College is a suite of

help students and families understand their options

online tools targeted to students

for financing the costs of college. This tool allows

and families evaluating their

consumers to see the future costs and risks of

options when financing a higher

different financing options, in order to enable them

to make informed choices. For example, private

education.

student loans may not offer the same consumer

protections as federal loans and are generally more expensive for borrowers. The guide includes

expert advice on the different types of student loans, and a plain-language explanation of the

terms, conditions, costs, and fees associated with these different products. This feature also

includes a printable one-page “action guide” that users can bring with them when evaluating

financing options.

Compare Financial Aid

The financial aid offer letters that prospective students receive from schools can be confusing,

and the descriptions of the different types of financial aid that are available can vary widely.

Compare Financial Aid allows users to make apples-to-apples comparisons among financial aid

offers from different colleges and universities. Users can take the financial aid offer letters

provided by their schools and build a personalized visualization of the costs of financing

college—including an estimate of the monthly payment upon graduation that would be required

to pay back the combined types of financial aid. This tool relies on data from the U.S.

Department of Education to fill in information that may not be included in the applicant’s

financial aid offer letter, giving users a more complete picture of their options. It also includes a 29

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feature designed to assist servicemembers, veterans, and their families in accessing information

about military educational benefits to which they may be entitled.

In April 2012, the Bureau released a prototype of Compare Financial Aid and asked the public to

provide feedback. We received input from students and parents across the country, as well as

high school guidance counselors, financial aid administrators, and other experts. We integrated

their feedback into subsequent iterations of Compare Financial Aid, releasing the latest version

in April 2013.

Repay Student Debt

Millions of borrowers are currently repaying federal and private student loans. Many borrowers

are eligible for a wide range of alternative repayment plans and other consumer protections, but

they may not understand their options. Repay Student Debt guides users through a series of

questions and provides a set of recommendations tailored to their answers. Borrowers can learn

more about repayment options that may lower their monthly payment or provide short-term

relief if they run into trouble; and borrowers in default can learn about options that might hold

the key to repairing their credit, going back to school, or bringing their loans back into good

standing. The Bureau launched a prototype of this tool in October 2011. Based on user feedback,

in July 2012, we launched a separate tool for borrowers in default and facing debt collection. In

December 2012, the Bureau launched the full-featured version of Repay Student Debt designed

to assist all borrowers in repayment.

Manage Your College Money

Manage Your College Money is an interactive guide for college students and prospective college

students to help inform what may be their first major choices in the financial services

marketplace. Users can learn about financial aid disbursement options and bank accounts, and

the costs and risks associated with these products. College students and prospective college

students can use Manage Your College Money to help them get settled financially even before

they get to campus.

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3.1.3 CFPB en Español

According to Census data, 37 million people in the

CFPB en Español provides a