America is slowly recovering from the most serious financial crisis since the Great Depression. There were many causes of the crisis. But the problems experienced by many Americans were exacerbated by the complexity of the financial marketplace and the complexity of the decisions that 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. Schools aren’t doing enough to teach key financial concepts and decision-making skills, and employers could do more.
The Consumer Financial Protection Bureau (CFPB) is the first federal government agency dedicated solely to consumer financial protection. It was created in 2011 following the passage of the Dodd-Frank Act, which has brought the most significant changes to financial regulation in the U.S. since the regulatory reform that followed the Great Depression. The CFPB is tasked with the responsibility to “promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services”. Enhancing financial literacy is an integral part of the CFPB’s function.
The CFPB works to:
Educate: An informed consumer is the first line of defense against abusive practices. The Bureau seeks opportunities to engage consumers at those moments when they are most receptive to learning about financial decisions.
Enforce: It supervises banks, credit unions, and other financial companies, and enforce federal consumer financial laws.
Study: It also gathers and analyzes available information to better understand consumers, financial services providers, and consumers financial markets.
It is fundamentally important that consumers be equipped to navigate the marketplace and the financial choices they face effectively to take more control over their economic lives. The CFPB partners with many organizations to provide financial education to consumers and the Office of Consumer Response, which is part of the CFPB’s Operations Division, hears directly from consumers about the challenges they face in the marketplace.
Managing one’s finances presents a complex set of challenges in today’s financial marketplace. Financial products are numerous and complex, requiring individuals to make choices from an array of options. Consumers are increasingly responsible for saving for and managing the funds for their retirement. Not having the skills to make sound financial decisions can have severe consequences for American’s abilities to reach their life goals.
The CFPB is doing its part to inform consumers. It has been one of the busiest regulators in banking, finalizing rules that tackle mortgages, disclosures and remittances, among many other things. Its agenda for 2015 continues to move at rapid speed as it attempts to address payday loans, debt collection and overdraft protection, which are likely to have a significant impact on the financial services arena. Furthermore, the agency aims to prevent financial harm to consumers while promoting good practices that benefit them. According to the 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. Consumers need to be able to make effective choices and recover from poor ones, and to know where to go for help.
There is a great need for financial literacy and capability. As a nation, we spend approximately $2 per person on financial education and $54 per person on financial services marketing in a year. All Americans, regardless of income and level of educational attainment, need to be able to evaluate the choices available to them in the financial marketplace and understand the implications of their financial decisions in order to build secure financial futures.
If you are struggling with your finances take one of our courses so you can be empowered to make better financial decisions. For more information on the CFPB take our “The Power of Credit” course or visit www.cfpb.gov.
Know the Facts!