Tampa, FL – CAB Meeting (AM Session) on 11/02/2017


Good morning. Welcome to the Consumer Financial
Protection Bureau’s public meeting of its Consumer Advisory Board, or CAB as we like
to call it, in downtown Tampa, Florida. The Consumer Financial Protection Bureau is an
independent federal agency whose mission is to help 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. As part of the Bureau’s mission
to protect consumers, to date, we have handled over 1.2 million complaints, and our actions
have resulted in nearly 12 billion in relief to more than 29 million consumers.
My name is Zixta Martinez. I serve as the Associate Director for the External Affairs
Division at the Consumer Bureau. Today’s meeting is being held at the Hilton Tampa Downtown
Hotel in Tampa, Florida. This is the CAB’s third meeting of the year, and, as always,
we have a packed schedule. Today’s meeting is being livestreamed at ConsumerFinance dot
gov, and a recording will be made available on the same website. You can also follow CFPB
on Facebook and Twitter. Let me spend a few minutes telling you what
you can expect at today’s meeting. First, I’ll introduce the CAB members, then the Consumer
Bureau’s Director, Richard Cordray, will provide opening remarks.
Following the Director’s remarks, Hector Ortiz, Policy Analyst in the Bureau’s Office for
Older Americans, will engage the CAB in a discussion about the Consumer Bureau’s Know
Before You Owe initiative on reverse mortgages. Then, at 11:15 a.m., the CAB will hear from
Janneke Ratcliffe, Assistant Director for the Bureau’s Office of Financial Education.
She will lead a discussion about financial wellbeing in the U.S. After that discussion,
the CAB will adjourn at approximately 12:15 p.m.
At 2:00 p.m., the CAB’s chair, Ann Baddour, will resume the meeting. CAB members Josh
Zinner and Ohad Samet will lead a discussion about trends and themes in the field.
Following that discussion, the CAB will hear from David Silberman, the Bureau’s Acting
Deputy Director and Associate Director for the Research, Markets, and Regulations Division.
David will lead a discussion about the Bureau’s final rule for payday, vehicle title, and
certain high-cost installment loans. After the discussion, there will be an opportunity
to hear from members of the public. The Dodd-Frank Wall Street Reform and Consumer
Protection Act, which created the Consumer Bureau, also provided for the establishment
of the Consumer Advisory Board to advise and consult with the CFPB in the exercise of its
functions and to provide information on emerging practices in the consumer financial products
or services industry, including regional trends, concerns, and other relevant information.
Today’s meeting and discussion is in support of this statutory responsibility. As a reminder,
the views of the CAB member are their views and they are greatly appreciated, yet they
do not represent the views of the CFPB. So, let’s get started with an introduction
of our CAB members. I ask CAB members to raise their hand when I call their name.
The Chair is Ann Baddour. She’s the Director of the Fair Financial Services Program at
Texas Appleseed in Austin, Texas. The Vice Chair is Lynn Drysdale. She is the
Managing Attorney of the Consumer Law Unit at Jacksonville Area Legal Aid in Jacksonville,
Florida. Randi Adelstein is the Assistant Director
Counsel for Regulatory Affairs at Mastercard, International in Purchase, New York.
Seema Agnani is the Executive Director for Asian Pacific American Community Development
in Washington, D.C. Sylvia Alvarez is the Executive Director at
the Housing and Education Alliance in Tampa, Florida.
Patricia Arvielo is the President and Co-Founder of New American Funding in Tustin, California.
Tim Chen is the CEO of NerdWallet in San Francisco, California.
Kathleen Engel is a Research Professor at Suffolk University Law School in Boston, Massachusetts.
Judith Fox is a Clinical Professor of Law at the University of Notre Dame in Notre Dame,
Indiana. Neil Hall is retired, having previously served
as the Executive Vice President and Head of Retail Banking at the PNC Financial Services
Group in Pittsburgh, Pennsylvania. William Howle is the head of U.S. Retail Banking
at Citibank in New York City. Brian Hughes is the Executive Vice President
and Chief Risk Officer at Discover Financial Services in Riverwoods, Illinois.
Julie Kalkowski is the Executive Director for the Financial Hope Collaborative at Creighton
University in Omaha, Nebraska. Ruhi Maker is a Senior Attorney at the Empire
Justice Center in Rochester, New York. Brent Neiser is Senior Director at the National
Endowment for Financial Education in Denver, Colorado.
Ohad Samet is the CEO of One True Holding Company in San Francisco, California.
Lisa Servon is a Professor of City and Regional Planning at the University of Pennsylvania
in Philadelphia, Pennsylvania. Dr. Howard Slaughter is the President and
CEO of Habitat for Humanity of Greater Pittsburgh in Pittsburgh, Pennsylvania.
James Wehmann is the Executive Vice President of Scores at the Fair Isaac Corporation in
Roseville, Minnesota. Chi Chi Wu is a Staff Attorney at the National
Consumer Law Center in Boston, Massachusetts. And Joshua Zinner is the CEO of the Interfaith
Center on Corporate Responsibility in New York City.
We also have with us today Gail Hillebrand, Associate Director for the Bureau’s Consumer
Education and Engagement Division, and Delicia Hand, Assistant Director for the Bureau’s
Advisory Board and Councils Office. I’m now pleased to introduce Richard Cordray.
Prior to his current role as the Consumer Bureau’s first Director, he led the CFPB’s
Enforcement Office. Before that, he served on the frontlines of consumer protection as
Ohio’s Attorney General. In this role, he recovered more than two billion for Ohio’s
retirees, investors, and business owners, and took major steps to help protect its consumers
from fraudulent foreclosures and financial predators. Before serving as Attorney General,
he also served as an Ohio State Representative, Ohio Treasurer, and Franklin County Treasurer.
Director Cordray? Thank you, Zixta, and welcome, everyone. Good
morning. I’d like to thank the Tampa community for hosting us so graciously and all of you
for being here, uh, today. Since we established the Consumer Advisory
Board, which we know as the CAB, 5 years ago, we’ve made sure that its membership spans
the nation. We also make it a point to travel outside of Washington, D.C., to learn more
about consumers in different parts of the country.
Yesterday, we learned about this city’s history and visited a retirement community to hear
more about the particular challenges facing constituencies such as older Americans. And
I want to make a particular thank you to Sylvia Alvarez, who, uh — and — and Lynn Drysdale
for organizing, uh, the tour we had of the community, uh, yesterday.
We’ve also had the opportunity to hear how natural disasters affect this community in
— from time to time, in particular, recent storms such as Irma and Maria. When these
catastrophes occur, they can have multiple, cascading effects, including financial effects.
It can be hard to know whom to trust and where to look for guidance and help, as well as
what financial steps to take as individuals and communities begin recovery, and that will
be true in Texas and Puerto Rico, as well. We shared that the Consumer Bureau offers
various resources and tools, including toolkits for consumers who are victims of hurricanes
and other natural disasters. These resources can help consumers figure out how to address
their most urgent financial needs and warn them away from common scams and fraudulent
schemes that always spring up in the wake of natural disasters.
Our dialogue with our CAB members helps improve the ways that consumer financial markets work
for American consumers. The Board is a diverse group that identifies key issues cropping
up around the country and presents broader perspectives on issues that sharpen our approach
to consumer financial protection. Today, I will share some information about our recent
work, and we will all seek your input, as well.
The issues that affect the financial security of older consumers are of great interest here.
Florida is often known as the Retirement State because it is home to over 4 million Americans
who are age 65 or older. In fact, just 60 miles north of here, in Sumter County, I’m
told that over half the residents are seniors. Since the Bureau was established in 2010,
we’ve adopted a consistent framework around much of our work in consumer education and
engagement. We call this approach and initiative Know Before You Owe, meaning that before consumers
make important decisions and take on financial responsibilities, they should be informed
about the costs and risks and terms of those choices. Over the years, this effort has produced
useful resources and new, consumer-friendly disclosures in a number of areas.
Late this summer, we added to this framework by releasing a report about the costs and
risks of using reverse mortgages to delay collecting Social Security benefits. The report
responded to an increasing promotion of this strategy by financial writers and those in
the reverse mortgage industry, often without discussing all of the costs and risks involved.
The CFPB analyzed this strategy using different scenarios and found that the cost of a reverse
mortgage usually exceeds the extra benefits that would be gained by delaying Social Security
retirement benefits from age 62 until full retirement age. We also found this strategy
can hurt borrowers by diminishing the home equity available to them later in life. As
a result, those who follow this strategy to sell their homes may be unable to relocate
or to handle a financial shock. We will be discussing this further, and, in particular,
we’d be glad to hear from you about how we can get this information across to more consumers
around the country who may be facing these same circumstances.
In addition to our focus on reverse mortgages, we will also engage in a topic about which
the CAB has provided much feedback over the last several years, which is our research
on measuring and understanding the factors that affect consumers’ financial wellbeing.
These prior conversations have covered two main topics. First, there was the Bureau’s
research to establish a consumer-driven definition of financial wellbeing. Second was our work
to develop a reliable and validated set of questions and create a scale to measure individual
financial wellbeing. Our most recent milestone in this research
— ongoing research, released in September, was our report on financial wellbeing in America,
which discusses the results of a nationwide survey that measured this phenomenon. The
survey showed that people’s sense of financial wellbeing varies widely, including within
the same age cohorts and racial and ethnic groups, as well as when people are grouped
by levels of income and education. The results also reveal the difficult financial circumstances
of many consumers, with more than 40% of U.S. adults reporting that they struggle to make
ends meet in a typical month. We also released an interactive online tool
that allows people to measure their own levels of financial wellbeing and a data set for
public use that allows researchers to explore how financial wellbeing relates to other factors.
All of these matters will be open for discussion today, and we’re interested to hear from you
about your other ideas you may have to further our ongoing research in this important area.
We are also mindful of the financial obstacles faced by Americans with limited English proficiency.
In a recent survey, Spanish-speaking Americans identified homeownership as their top financial
goal. In fact, Latino American homeownership has grown steadily since 2010, even as overall
homeownership decreased nationwide. At the same time, we know this group of consumers
often has thinner credit files and makes less use of banks and credit unions.
We want to help these individuals and families achieve their dream of homeownership by equipping
them with the information, steps, and tools they need. So, we’re reaching out to Spanish-speaking
Americans who aspire to future homeownership and encouraging them to use banks, credit
unions, and financial products to build up their positive credit history. In so doing,
we’re helping this population lay the foundations for future homeownership.
To see our latest offering — and I will not do this as well as Zixta would, but Como Prepararse
Para Comprar Una Casa — How to Get Ready to Buy a Home if you didn’t understand my
Spanish translation — visit our Spanish website at CFPB dot gov backslash ES. From consumer
advocates around the country, we’ve been hearing that outreach into immigrant communities is
especially important right now, so once again, we’re interested in your thoughts about how
we may enable more consumers and their families to benefit from this new resource.
Payday, auto title, and other similar loans have been of continued interest to the CAB
over the last several years. Earlier last month, we issued a new rule addressing widespread
debt traps in the credit markets for these products and for longer-term balloon payment
loans. The core principle of our rule rests on the
basic principle of requiring lenders to make a reasonable assessment up front of whether
people can afford to repay these loans. It also curtails repeated attempts to debit checking
accounts that rack up fees and make it harder for consumers to get out of debt from both
short-term and longer-term loans. These protections bring needed reform to a market where, far
too often, lenders have succeeded by setting up borrowers to fail.
Payday and vehicle title loans often are marketed heavily to financially vulnerable consumers.
Although they offer access to credit for cash-strapped consumers, the requirement that these loans
must be repaid in full can make them unaffordable. If a borrower living paycheck to paycheck
needs such a loan to cover basic expenses or recover from a large expense or drop in
income, they will probably face the same shortfall when they get their next paycheck, only now,
they have the added cost of loan fees or interest. Faced with unaffordable payments, consumers
must choose between defaulting, reborrowing, or failing to pay their major financial obligations
or basic living expenses. Many borrowers in this difficult situation
end up rolling over or refinancing their loans again and again. More than four out of five
payday loans are reborrowed within a month, usually right when the loan is due or soon
thereafter. About one in four initial loans are reborrowed nine times or more as consumers
pay far more in fees than they borrowed in the first place. People have similar experiences
with auto title loans, and one out of five borrowers end up having their car or truck
seized by the lender because they cannot repay the debt.
This cycle of piling on new debt to pay back old debt can turn a single, unaffordable loan
into a long-term debt trap. It is a bit like getting into a taxi for a ride across town,
then finding yourself stuck in a ruinously costly cross-country journey with no exit
ramps. With each renewed loan, the consumer pays more fees or interest on the same debt.
The consequences are severe. Even those who renew the loan repeatedly and at great cost
may still wind up in default and get chased by debt collectors or have their car or truck
repossessed or lose their accounts. In fact, our research has shown that the business
model for payday and auto title lenders is built on miring people in debt in this way.
Lenders actually prefer customers who will reborrow repeatedly rather than simply repaying
the loan when it comes due. That way, they can continue collecting fees or interest as
long as the borrower does not fully repay. And where lenders make repeated attempts to
debit payments from their accounts, that can add significant penalties as overdue borrowers
get hit with multiple fees and may even have their bank accounts closed.
Our rule takes square aim at these practices. They’re the subject of intense public interest,
as we received about 1.4 million public comments on the proposed rule.
Later today, we’ll be hearing from David Silberman, our Acting Deputy Director, who will lay out
more of the details of the final payday rule. We intend to have a conversation that sheds
light on the need, as we see it, to ensure that consumers have access to safe products
and ensure that they are both supported and protected in using these products.
So, thank you, again, for being here, and we look forward to all of the discussions
today on these issues and on any others you would like to raise. Thank you.
Thank you, Director Cordray, and welcome to this fall meeting of the Consumer Advisory
Board. Since 2012, when the CAB was established,
small-dollar lending, both access to safe small-dollar products and restrictions on
predatory products, has featured as a discussion item for the CAB. As Director Cordray just
presented to you, earlier last month, the Bureau finalized its rule on small-dollar
loans, and this is our first opportunity to provide feedback and input to the Bureau.
Today’s meeting focuses on some very important topics, such as reverse mortgages, financial
wellbeing, debt collector — debt collection, and small-dollar lending. To get us started,
I’d like to welcome Hector Ortiz from the Office of Older Americans. This summer, the
Bureau released a report examining the costs and risks of using a — a reverse mortgage
to delay collecting Social Security benefits. Hector will walk us through the report’s findings,
and then we’ll take feedback from the CAB. Hector?
Oh, thank you, again, and, uh, good morning, everyone. Um, I’m with the, uh — CFPB’s Office
for Older Americans. Uh, our office works to protect, uh, older consumers, uh, defined
as those, uh, who are age 62 and older, but we also work, uh, with those professionals
and the family members who support them, uh, in order to protect them from financial harm
and to support, uh, their financial decision-making on those issues, uh, and — and decisions
that are important for their later-life economic security. Therefore, decisions about home
equity, uh, and Social Security, uh, one of the two most important resources that older
consumers have, are of great interest to our office.
Uh, since the Consumer, uh, Advisory Board’s establishment in 2012, our office has proactively,
uh, sought feedback on a number of issues and workstreams from this, uh, committee,
uh, and our feedback has always been incorporated throughout our work. Our presentation today
focuses on the finding of our August 24th report on the costs and risks of using a reverse
mortgage. Before I begin, uh, I would like to disclaim
that my presentation, uh, does not constitute, uh, legal interpretation or guidance, uh,
from the Bureau, uh, and any opinions and views, uh, are my own and may not represent,
necessarily, the views of the, uh, Bureau. Uh, our recent work on reverse mortgages and
Social Security, uh, builds on our previous work on reverse mortgage advertising. In our
reverse mortgage ad study, we found consumers who saw red, uh, and — and heard, uh, many
reverse mortgage ads had huge misconceptions about reverse mortgages, specifically some
consumers who are confused about the costs and risks of borrowing a reverse mortgage,
such as, uh, they thought it was government benefits, so not loans that had to be repaid.
Uh, some thought that reverse mortgages proceeds were tax free, therefore, borrowers did not
have to pay, uh, property taxes, and that they, uh, cannot lose their homes, uh, from
a reverse mortgage. As we continue monitoring this market and
identify areas, uh, where consumer education, uh, was of great value in order to help consumers
make informed decisions, we were specifically interested in one growing promotion, uh, for
a use of a reverse mortgage, and that is to collect — uh, delay, uh, the collection of,
uh, Social Security benefits. As we read blogs, uh, articles on this topic, uh, what we found
was that many financial professionals, writers, uh, whether it was in those blogs and books,
uh, and — and pieces, were often missing a discussion on the risks and costs associated,
uh, with this strategy. And furthermore, uh, only a few of those, uh, really specified
under what circumstances such strategy could work.
Before I discuss the specific findings of our report, I want to briefly talk about the
importance of Social Security and the claiming decision, but also the importance of home
equity in — particularly in today’s retirement landscape and for those who are approaching
retirement. Uh, it’s not a surprise when maximizing Social
Security will be an attractive goal to many, uh, Americans retiring today. About 85%, uh,
of a consumer 65 and older receive income from Social Security, and on average, Social
Security accounts for 63% of the income of those beneficiaries who are 65 and older.
But as you age, uh, it becomes even more important. And so, for those beneficiaries who are 80
and older, Social Security accounts for 71% of their income.
Uh, we also know that Social Security’s likely to be an even more important source of income
for those who are approaching retirement today, as a growing number of them are expected to
reach, uh, retirement without — uh, with limited savings and without a traditional
pension. Uh, that means that Social Security’s likely to be the only source of guaranteed
regular income that is also protected against inflation. In 2015, the average Social Security
benefit — monthly benefit was, uh, 1,300 a month.
Um, approximately 40% of eligible individuals who claim Social Security do so at age 62,
and about 75% even before what Social Security calls their full retirement age, thereby receiving
what, uh, we know as a permanent reduction in their benefits. And one way in which individuals
can increase their monthly income is by, uh, waiting to collect their benefits until their
full benefit age or up to, uh, their full retirement — um, their maximum claiming age,
which is age 70. For those who are born in — after 1960, uh, the reduction for claiming
at age 62 can be as much as 30% of the benefit that they are entitled.
When consumer make — when a consumer makes, uh, an informed decision about when to claim
Social Security, not only they’re boosting their monthly, uh, paycheck and their monthly
income, they could also be boosting their lifetime amount, and that is the case, uh,
because consumer today, uh, those who live to the average life expectancy of a 62-year-old,
that is approximately age 85, will receive more money over their life course from an
increased benefit for a shorter amount of time than getting a smaller benefit for a
longer amount of time. Uh, let me just now quickly talk about the
importance of home equity. We saw already the savings shortfall and the importance of
Social Security. On the other hand, uh, home equity is the other important financial resource
that older consumers have. Uh, in 2016, um, 80% or — uh, of those who are 65 and older
own their homes, a significant portion of them — and we have noted this in previous
work — with a mortgage and 70% without. Home equity, compared to other financial resources,
is the most valuable asset for the largest number of older consumers. In fact, in 2016,
uh, home equity accounted for 20% of all the assets held by older consumers.
Homeownership provides affordable housing and retirement but also is a source of potential
liquid savings, and one way in which consumers can tap that equity, uh, is through borrowing
against, uh, the — uh, the equity through a reverse mortgage. Uh, we know, uh, specifically,
that a reverse mortgage loan — that’s a very unique type of loan — for those who are 62
and older, where the consumer doesn’t have to repay the loan until the last borrower
dies or moves from the home as long as they live in the home, maintain the home in good
repair, and pay the real estate taxes and homeowner’s insurance.
Now, one strategy that, again, professionals are trying to promote is — that links this
to common sources is to borrow the — at age 62 in order to delay claiming Social Security
until their full retirement age, which, uh, depends. Uh, it could be 66 or, uh, up to,
uh, 67, depending, again, on the date of birth, or even to their maximum claiming age of age
70. Uh, to examine the costs and risks, uh, and
tradeoffs of this strategy, we looked at a series of scenarios that quantified the reverse
mortgage for a hypothetical retired homeowner and compared those against the expected additional
lifetime benefits from delaying Social Security from age 62 until age 67, uh, and we looked
at the lifetime by the average life expectancy. We made other assumptions that I’m happy to
discuss in more detail, uh, in our discussion, uh, including, uh, uh, the — the average
home value of 175,000 and a — an interest rate of 5.9%.
Our finding — our first finding is that, in general, a reverse mortgage loan cost — that
is the origination cost, the interest, mortgage insurance premiums, and the fees — will exceed
the additional amount of money in lifetime Social Security benefits that a homeowner
will realize. Let’s talk, briefly, about, what is that amount,
that lifetime amount in Social Security benefits. So, for example, a homeowner with an expected
benefit of $900 — uh, about, uh, $910 at age 62 that delays claiming Social Security
until age 67 will get $1,300 a month. Given the average life expectancy of a 62-year-old
today is age 85, this homeowner is likely to receive a cumulative benefit, in today’s
dollars, that is about 30,000 more by age 85, uh, if that person, again, claims at 67
rather than age 62. In other words, the benefit here is $30,000.
The next thing that I want to talk about is, how much are they borrowing in order to delay.
So, we’re assuming here that the individual’s, uh, borrowing basically the — or the principal
amount of reverse mortgage loan is the amount of money that the borrower will have received,
uh, from Social Security between the ages of 62 and 67, and that is 54,600, and we’re
assuming that the borrower, again, is taking a line-of-credit feature in equal installments
of $900, uh, over the course of that 5-year period.
So, now let’s look at the costs. Um, we know that a homeowner that, uh, borrows a reverse
mortgage is, uh, receiving loan proceeds secured by their home, uh, during the period of delay,
and in doing so, they’re assuming debt not just for the principal amount, but also the
interest, mortgage insurance premiums, servicing fees. But we also know that, uh, most people
— in fact, 99% — uh, will also, uh, roll the — the up-front cost origination and closing
costs into the reverse mortgage, uh, cost, and, uh, those are also factored in this number.
And what we find is that by age 67, when they’re starting to collect their Social Security
benefit, the loan balance already will be $76,000 and by age 85 will be $233,0000. Now,
if we compare just those costs against the $30,000 that we saw earlier, what we find
is that, uh — we go, age by age, from all the way — age 67 to 85, what we find is that,
uh, at — at a given age, uh, the — this becomes a cost to the consumer.
Uh, as you can see here, at age, uh, 69, which is the average, uh, life, uh — the average
life of a loan, the average, uh, tenure of a loan, uh, the costs, uh, of a reverse mortgage,
uh, exceed the, uh — the additional benefit by about $2,000. By age 85, the average life
expectancy, the costs exceed, uh, the — the — the additional benefit by 149,000.
However, there is one particular instance here where you can see a benefit for the — a
net benefit of $8,000, and that is those who pay off the loan immediately. Now, paying
off the loan immediately, uh, also raises a question: Who can do it? Uh, and as — as
we know, uh, many older consumers, uh, those whose home is their main asset, are unlikely
to have other resources to pay the loan immediately and will have to do so by selling their home.
And in fact, the study from Stephanie Moulton found is that those who — homeowners who
obtain and retain a reverse mortgage had less than $21,000 in non-housing assets. So, uh
— so, there’s certainly, uh, uh — this is a decision that, once you make, most likely
you will not be able to get out unless you sell your home.
Um, in addition to this finding, we basically looked at the basics, how much it costs to
borrow those $54,000 dollars. And as we can see, uh, by age, uh, 67, the costs are about
40% of that principal borrowed. By age 69, it’s 60%, but by the average life expectancy,
you’re looking at 3 times the cost of the amount borrowed.
Um, now, the other thing that is a little bit more difficult to predict for many consumers,
and that is whether or not they will be able to stay in their homes for — until their
death and — and — and through their life expectancy. And that, uh — it raises a risk
for those who have to sell their homes and, uh, need the proceeds to buy a new home and
to also handle a large financial shock, whether it’s long-term care, uh, or other, uh, need
that requires a large infusion of cash, uh, and that is that, uh, there — the — the
borrowing of a reverse mortgage at such an early age will be reflected in the reduced
equity that homeowners will have in — in their homes. Um, and this is, again, problematic
if — if — and — if it becomes desirable to sell the home.
Consider the example of a typical 62-year-old, with a home, again, worth 175,000, and that
home is appreciating at a 4% rate per year. Because the interest rate here is 5.9, the
home value will be, um — will be, uh, about 213,000 at age, um — at age 67 and 430,000
at age 85. So, their equity is increasing over time, but that loan balance is increasing
much faster. And what’s happening is that that homeowner
will only own, uh, 64% of the total value at age, uh, 67 and by age 85 will only, uh
— will own, uh, only 46% of the home, um, and this is so dependent on appreciation rates.
Uh, if that, uh, home is appreciating at a lower rate, like the 2% rate — and we know
from studies, that’s more aligned with older consumers’ home appreciation rates — uh,
the risk is bigger, and what you’re seeing is, by age 85, the consumer will only own,
uh, about 16% of the home value. And, again, this is just using the reverse mortgage to
do that small, uh, delay at the beginning. Um, uh, these were our two main findings.
We’re certainly, uh, looking forward to your feedback on this and — and having more discussion
on assumptions and — and other items, but I want to also share with you other two resources
that were released that same date, uh, that are related to this idea of informing consumer
of costs and risks, and one of them was a — a — a video and a discussion guide that
we put together. Uh, the video was, uh, another example of the collaborative work in the Bureau
between our office and our technology office and other, uh, units, uh, and I would like
to, uh, play this short video for you. Uh, thank you, again, for, uh, playing the
video. Uh, I — I also, um, want to share with you, briefly, um, another important resource
that we, uh, developed, uh, also dealing with one strategy, a selling point, uh, on reverse
mortgages, which is the notion that, uh, reverse mortgages are a product to age in place. And
the blog provides things to consider for consumers about this concept of aging in place, and
one of the particular notions that we challenge is that aging in place, uh, means exactly,
uh, stay in your home — own home. Um, the other, uh, work that we have done
is, we certainly looked at our complaints, and we have, uh, summarized the issues that
we find, uh, common issues that older consumers and their family members face with reverse
mortgages. Uh, we published a report in 2015, but more recently, in May, uh, the CFPB published
a report focused on all the complaints from older consumers, and it has a subsection on
reverse mortgages. Um, and lastly, we are very interested in
the claiming decision itself, and we have created, uh, a tool, uh, to help consumers
navigate this important decision, particularly those who are thinking of it, uh, early on
and thinking about how to map their retirement, uh, process. Uh, we worked in collaboration
with the Social Security Administration. Uh, our tool is award winning, um, plain language.
It was developed, uh, to make, uh, this important and very complex decision easy to understand,
uh, and it’s available in Spanish and, more importantly, it’s our recognition, again,
of the importance of the — the financial capability challenge involving this important
decision. Um, I — I want to move now to the discussion.
Uh, I just want to say that, uh, we got a lot of feedback from media and the industry,
and, uh, our critics, even, have acknowledged that we have made a huge public service, uh,
by engaging in this debate. And as a result of our — the discussions generated in this
issue brief, we received precisely what we need, which is a level of specificity as to
whom and under what circumstances a strategy, uh, like this can work. Uh, and many people
have said — and come out and said that this is not a standalone strategy; this is not
a strategy to be done, uh, as a do-it-yourself, uh, even as those, uh — those — those are
big warnings, uh, coming out from those financial professionals, and, uh — that it needs to
be done with a professional with the best interests of the consumer.
Um, now I — I want to move to, uh, hear from, uh, CAB members, and we’re certainly interested
in this work but also generally in what we can do to support older homeowners, understand
both the potential risks and benefits of using home equity in general to supplement a retirement
income. Thank you. Thank you so much, um, Hector. So, now we’re
going to move to the CAB discussion. And so, Josh, would you like to start us off?
Yeah. Thanks so much, Hector, this is really important work, uh, and it’s going to be really
beneficial to a lot of older Americans. Uh, just to flag, uh, a few other issues that
arise, which I — I’m — I’m sure you’re well aware of but just to put them on the table.
Uh, you know, the reverse mortgages can make a lot of sense for certain people, but there’s
also a lot of very aggressive, um, push marketing of reverse mortgage products.
Uh, and one of the things that — that we see is that people are, in — in an attempt
to maximize, uh, what they’re getting back on the reverse mortgage, um, their spouses
are not written onto the — the mortgage. Uh, and, um, this, of course, increases what
they get back, but what a lot of people don’t understand is that then, when they pass, uh,
their spouse is facing foreclosure, and that’s a — a big issue.
Uh, also, a lot of, uh, lower-income families that we’ve seen through the years have their
— their children living in the — in the home, uh, and they don’t have a full understanding,
when these — when they’re entering into these reverse mortgages, that when they pass, uh,
that’s going to put their — their children out on the street unless they can refinance
in — in most of these situations. The, uh — the children who are living in the home
don’t have — adult children don’t have the — the — the capacity to — to refinance,
uh, and then lose that, uh — that home that they’ve, uh, lived in that’s really the only
source of family wealth, often. Uh, and that, finally, um, we’re — we’re
— we’ve been seeing a — uh, advocates in New York have been seeing, uh, a lot of issues
around servicing on reverse mortgages, and particularly where people fall behind on their
taxes and, uh, insurance. Uh, instead of working with the homeowner to, uh — to resolve those
issues and turn to payment plans on the taxes, et cetera, uh, they — certain servicers — um,
not all, but certain — are moving very quickly to, uh, foreclosure and putting, um, seniors
at risk of — of losing their homes, when they entered into the reverse mortgage believing
that they would — that would give them the opportunity to live in their home for the
rest of their lives. So, those are, uh, you know, issues that we’re
seeing that are — are worrisome. Brent?
Yeah, Brent Neiser, National Endowment for Financial Education. This is an outstanding
study, and we’ve come so far in the claiming information about Social Security. So, it’s
— it really goes, uh, to that level. Uh, folks in this setting have to think about,
uh, a couple of fundamental questions: Where are they going to live, and how are they going
to pay for their retirement life or — which, you know, may include some part-time work?
Um, I’m going to give you a few comments about, um, anchoring numbers, uh, and I think a lot
of what we’re facing is a question of sequencing. What follows what?
And here, your study shows the importance of keeping that — trying to delay claiming
Social Security, the benefit of that, but the cost of doing a reverse mortgage before
Social Security is really out of sequence and can be, uh, uh, very inappropriate. Some
of us call this a bridging strategy. So, as you’re not working as much, how do you bridge
to — to — uh, your financial life to claim Social Security later? And really, reverse
mortgages should happen after the Social Security claiming decision, because you need that capacity
for medical bills and — as many things that Jonathan has talked about. So, a home has
become a 401(k) for many people that don’t have a 401(k), and you need to keep that in
reserve as much as possible. So, just a couple of comments on the anchoring
thoughts of — of — and we faced this with Social Security, and they’ve come a long way.
Uh, before, a lot of the information from their office almost biased implicitly toward
age 62, early retirement. They’ve really shifted a lot. You’ve done great work in — in, uh,
public awareness on that. So, on some of your materials, where you mention,
um, you know, age 62, that becomes an anchor number for a lot of folks, but it’s not a
magic number, but it’s a starting line; it’s a beginning point of consideration for that
option. And whereas people used to think of that same number for early retirement as the
starting point for Social Security claiming, we’ve kind of moved away from that.
On page 3 of one of the public, uh, documents you have here for, uh, consumers — let me
just quote this, and I can show this to the staff later. Uh, it says, Consider alternatives
to wait. If you — if you take out a reverse mortgage when you are too young, you may have
run out of money. Now, that’s important. You might want to think about something — if
you take out a reverse mortgage when you’re first eligible, that kind of slows it down,
helps people to consider that. But I think you’ve done great work here, uh, and we — we
— we need not nudge people to that starting line at age 62, as Social Security kind of
did a few years ago but has gotten away from that. So, I think you have a — another federal
agency to model good behavior for public information. Lynn?
Thank you so much, and thank you, Hector, for such a comprehensive report, um, as well
as some really eye-opening numbers about how taking out a reverse mortgage when you’re
62, uh, can affect your ability to access money much later in life, as well as the amounts
of money that you can receive, um, over time. Um, as someone who is already receiving solicitations
for reverse mortgages, I can really see, um, when I compare myself to my 70-, 80-, and
90-year-old clients, as well as my parents, who also fall into those categories, um, how
much different my perspective would be on getting a reverse mortgage now, um, than my
clients’ and my parents’. And the two things I want to highlight the most, I think, are
the responsibility of the borrower to maintain the taxes and the insurance as well as to
keep up with the requirements that the servicers, um, impose relating to the borrower’s occupancy
of the property. Um, as a, um — someone on the younger end
of that spectrum, I don’t think I would have any problem with paying taxes. I wouldn’t
have any problem with paying insurance, um, and I certainly wouldn’t have any problem
in — in following the changing players, as servicers change, or following the changing
rules as they seem to change as the mortgage, um, matures, not because of the terms of the
note and mortgage change but just because the internal rules of the servicers change.
Um, and there are two factors in that specific — particularly with taxes and insurance,
um, because not only are the borrowers aging, but the homes are aging.
And I know so many of my clients who come in, um, in their 70s and 80s. They’re — they’re
okay with the concept of obtaining insurance, but they can’t because their homes are in
need of repair. And if there are set-asides with the reverse mortgage, then that just
means they’re going to get much — much, much less at the beginning. So, they’re either
going to get much less, or they’re going to have problems in obtaining insurance later
in life. When, maybe, they’re still, uh, conceptually able to do so, their homes have aged too much.
Um, and I — I think one of my clients highlights the problems with navigating the insurance
rules, um, in a very unfortunate way, a 92-year-old client who was literally foreclosed upon because
she owed $.27 in back, um, force-placed insurance, um, sums. And while she tried to write the
checks to pay that amount, her eyesight was not so good, and so when she got a letter
saying she owed $.30, she thought it meant that she owed 3 and sent them a check for
$.03. And so, although it’s very sad, that sort of thing is very common.
Um, and then, shifting to the occupancy issue, um, I know that I have been telling my parents,
and I often hear adult children of my clients telling me that — that they tell their parents,
because of identity theft concerns and just, you know, um, because they’re so vulnerable
to scams, that if you get a letter from somebody that you don’t know, you tear it up, or best
— better even, still, shred it. If you get a call from someone you don’t know, um, don’t
answer it or don’t continue it, and certainly don’t ever open the door to someone that you
don’t know. And we’re finding that the, um, occupancy
rules that seem to continue to change and are not set out in the note and mortgage require
elderly people to sign postcards and return them, to sign letters and return them, and
this is after they’ve been told by their children to ignore all of this stuff. And so, the very
thing that we are doing to try to protect our adult parents is the thing that is going
to get them kicked out of their home if they don’t return letters or postcards. Um, and
I — I couldn’t tell my parents to pay attention and look out for those things, because if
I looked at the note and mortgage, I wouldn’t see that written anywhere in the document.
So, I — I just cannot thank you enough for the — the educational efforts and all of
your very difficult research on this. I think, um, as that — being in that demographic,
I think 62 years old is way too young to be making decisions that are going to affect
me when I’m 70 and 80 and 90. Thank you. Sylvia and then Lisa.
Thank you, Ann, uh, and thank you, Hector. Um, as — as we know, Florida is a haven for
the elderly, and, uh, the elderly population is really the most vulnerable. We had a similar
case to what Lynn was talking about in our agency, where, um, this elderly lady — she
was — or a widow, her roof needed to be replaced, and there was no money. She had no money to
do — to do the repairs. Uh, she ended up in foreclosure. Luckily, we were able to get
the house sold for her before the foreclosure happened, but we see these types of things
all the time. And one of the things that I’m concerned about
is the commercials, and that was, uh, mentioned earlier, and they use celebrities that tend
to be, uh, someone that the elderly can relate to. And some of the commercials even say,
you’re not — you can take advantage of a government benefit.
Um, I’m just wondering if there’s any way that — and — and I do know that counseling
is required before you get one of these loans, but they’re extremely difficult to understand.
Uh, that being said, the same way that there are disclaimers on cigarettes, there should
be a disclaimer, somewhere, that these people sign, so that they really understand what
they’re — you know, the harm that could come to them. Um, I don’t know if that’s even a
possibility at this point. Um, one of the ideas of the discussion guide
was precisely to serve as that document that the consumer, uh, uh, consumes, uh, prior
to that, uh, conversation with the housing counselor. Uh, the — the video and the discussion
guide are both precisely informed by our findings in that reverse mortgage ad study, like that’s
how you — we — why you saw the big emphasis it’s not a government benefit; it’s a loan.
Uh, you can lose your home. So, those were things that people didn’t get, uh, um — they
were totally confused when they saw the ads. Uh, we had enforcement actions on — on reverse
mortgage advertisement, and we also, uh — the study itself, uh, got the attention of the
industry, uh, but we — you know, we benefit from, precisely, forums like this. If you
continue seeing, uh, those, uh, activities and areas in which consumers continue to be
confused, uh, by those TV ads, uh, to provide us, and we will certainly, uh, uh, work on
— on — on that area of consumer education. But, uh, the guide precisely was — was informed
by those findings. Thank you for this work, super important.
Um, I have two quick questions. One is, uh, whether you looked at the characteristics
of people for whom this would be a good choice. So, obviously, a small group, but is there
a set of characteristics in common, uh, so that, you know — to help people make these
decisions? And the second is just to ask about your dissemination
plan, how you plan to get this information out to consumers, and whether you’re working
through agencies, et cetera. Oh, uh, thank you, and — and the — the idea
was, uh, we — we have a team in our office that works besides me, in — in the — in
the area of — of engagement and outreach. And — and so, they are working precisely
with HUD, uh, with counselors, which is certainly one of those places where consumers will certainly,
uh, be able to benefit from those, but also, we’re working with other nonprofits that have
been in this space for a long time, like National Council on Aging, uh, and — and those are
very important, again, uh, uh, sort of, venues to distribute this.
Uh, we, um — in terms of — of examining other scenarios, uh, our, uh, take on — on
precisely all of the assumptions that we use is that, as you could see, there are certain,
uh, assumptions that are key to changing the — the tradeoffs. So, for instance, if someone’s
— uh, whether it is life expectancy — If someone is able to know that their life expectancy
is 95, I — I would like to meet that person. But more importantly, it would be great, um,
again, if — if — if — but if the planning horizon is age 95, you know, you want to plan
for that age, regardless of — of how you feel. Uh, that, for instance, is a scenario
that increases the benefit out of your lifetime Social Security benefit, and therefore, the
possibility of assuming that, uh, loan up to a higher age. Um, but, again, it’s — it’s
— it — it — what — what our strategy here was, to raise this — the visibility of this
topic among the professionals who are providing this, uh, type of advice.
And — and it was very noted, not only in the comment sections in blogs from — , venues
were, you know, reverse mortgage, uh, brokers and financial planners who were discussing
situations in which, for instance, they will say to a consumer, Don’t even think of this,
or, You may be a candidate, but you should be willing to know that you’re going to stay
in your home until death. And that’s, for instance, one of those things where everyone
was saying, You should know that that’s where you’re going to be, either because you have
children that are going to stay there anyways or there’s other, uh, variables that contribute
to being willing to take that — those risks. So, I think, Lisa, you put your finger on
something that’s relevant here, and it’s also a general phenomenon across consumer finance
markets, which is, the financial strategy here is a quite plausible one. If you can
delay claiming Social Security benefits, you’re going to actually get more money per month
when you eventually do claim, although you’ll have that more money per month over a shorter
period of time. So, that’s a — that’s a judgment that people
have to make. And we’ve done a lot of, uh, work and, uh, offered a lot of, uh, insight,
working with the Social Security Administration, around that choice. Many people don’t even
realize they have that choice to make; they just assume that they’re eligible at an age,
that’s when they’re supposed to claim, and they don’t recognize that they have, uh, things
that they need to weigh. The — the trouble with a — with a plausible
claim like this and that — that a reverse mortgage could fill the gap and allow you
to claim later is that it’ll be true for some people, but it will not be true for others,
but all of that nuance gets lost in the marketing. People — people want to market a product,
and they will market it very aggressively, and all the nuance falls out in the marketing.
And suddenly, you’re — they’re presenting it as though, for everyone, this makes a great
deal of sense. And what we’re trying to do with this report
is fight back in the — the discussion and the debate and point out that there is nuance
here, and it will work for some and not for others; there’s more that needs to be considered
than just — just assuming that a plausible surface strategy works in the same way for
everybody. Uh, but, again, the incentives people have to sell a product, uh, means that
they will, uh — they will cut corners and — and not, uh, present it to people, uh,
in — in a way that’s really congruent to their circumstances, and that — that’s a
battle we fight across — across the spectrum with lots of different, uh, products.
I think one of our early reports that Gail’s group did, uh, in the Office of Financial
Education, was demonstrating that the amount of money spent on marketing financial products
to American consumers was — What was the number, Gail, 25 times the amount of all of
the aggregate, even plausible, uh, scenarios of — of amount spent on educating those consumers?
Yeah, it was 25 to 1. Yeah. So, that’s — that’s part of the problem,
is big, loud megaphone, selling, selling, selling, and very small, still voice saying,
Hey, think more carefully, uh, and — and understand that there’s nuance here that you
need to think through. Judy, then Neil and Kathleen.
So, um, I agree with all of the problems that people have brought up, but I wanted to go
in just a slightly different direction. Um, I think we recognize that a lot of this has
to do with the fact that people are trying to figure out how to survive retirement and
feeling that Social Security isn’t going to be enough to do that, and so there’s all these
different strategies. And, um, I’m thinking in terms of the dissemination. I think it’s
something Lisa was talking about. I was recently invited to an event, um, in
Chicago with the SEC, um, and you may already be aware of this big effort, but, um, they
are finding real problems with small-dollar investors who are doing the same kind of thing.
Right? They’re trying to figure out how to — to supplement their — their income and
getting involved in lots of scams with small investments — couple thousand here or there
— which is kind of the population that this is — appealed to. And I know that they’ve
set out an effort to go around the country and — and — especially really thinking about
going into churches, because they find affinity fraud is a big area.
And it just strikes me that some of these materials, uh, coupled with what they’re talking
about, would be useful. So, I don’t know if you partner with them or — or, you know,
just inform them to — to have these things along, because I think — I think if you could
reach that audience, when they’re thinking about these things at 59, 60, 61, you know,
um, it might be useful to, you know, give people a fuller picture.
I think there’s a, um — Like Lynn, now that, uh, my husband and I are — are reaching this
age, you’re — you’re — you know, the daily barrage of mail coming in, and you start to
notice all the commercials. And I think that people don’t really get time to sit down and
think it through, and perhaps getting that information a little bit earlier, where they
can digest it, would be useful, and I think that might be one place you could get involved.
So — so, I think you lay out a very clear case that it’s a bad financial trade, uh,
to — to bridge, you know, this with a reverse mortgage, but — though having personal experience
with, uh, some family members, uh, who kind of — In the debate, the response is, But
I need the money now. So, it is, effectively, a transaction that — and I think building
on some of the things that Brent mentioned — it’s kind of too late to get into that
debate if that’s the mindset of the people that they’re involved.
So, I — I just wonder, uh, if — The target audience for the transaction I appreciate
and I agree with, but I do think that the long-term target audience are people who are
50 or 55, and that as part of a broader financial plan, uh, uh, education, I think, is important.
And the other thing that I’ve been kind of wrestling with now, uh, as I, uh — my — you
know, a lot of my — my peers, my age peers, are kind of in this, kind of, pickle. There
— there isn’t a place that a low-, moderate-income person can go for retirement planning that,
I think, is efficient and effective, and — and I wonder if the Bureau has kind of thought
about that as a, uh — a — a place to look. Because I think that it also, then, has relationship
to some of the products and services that, uh, you know, people need.
So, you know, a retired person needs to think about an investment strategy, uh, an income,
a cash flow strategy, a asset-protection strategy, and all of that stuff that people have mentioned,
and I just wonder where you might be in terms of your thinking about that.
Um, you’re absolutely right that this is a decision that is hard to make at the moment,
when you wish you had made it 10 years sooner. The — so — so, you’ve given us a lot to
think about. There’s more work to do. But one thing we have done is, the Time of
Retirement Tool. The target audience of that is 50 and up. The idea is, start thinking,
when you’re 50, What age do I need this income? Because that’s a time when people, if their
physical health allows that, could still choose to work a little longer, to, um, think about
where they want to live in retirement, to make those kinds of — of budgeting trade-offs
at a moment when you can still change your income if you’re able to work and you’re — and
you’re still employed. And you’re right, people need to think about
that earlier. So, the Time of Retirement Tool target audience, in fact, is people who are
still actively working and daydreaming about retirement, so that that daydream becomes
a little more, uh, grounded in some of the financial realities.
Uh, we have done some cooperative work with the SEC, and we’ll certainly look into what
else they’re doing. We did a piece on, um, uh, the difference between a real investment
advisor and — and a fake senior — you know, senior expert with a 4-hour course behind
their name. Um, so we’ll look at what else can be done, but there’s more to think about
here, certainly. And — and I think Neil’s point, which is
a good one and quite suited to the Office of Financial Empowerment, is that people of
modest means do not, uh, make — do not become good candidates for anybody to give them financial
advice about retirement. If they have greater means, then they’re more attractive customers
to financial planners. But the great mass of Americans, many of whom need this advice
the most, it’s not going to be, uh, you know, financially sound for somebody to offer it
to them for — for profit. Uh, so we’re going to need to figure out ways in, perhaps, this
Bureau to fill that gap, so. Kathleen?
Uh, thank you, Gail and, uh, Hector, for another, uh, great project and important report. As
I’ve been listening to the discussion and the — thinking about the discussions we had
about payday lending yesterday, I’m, uh — I’m — and overdraft — I’m aware that, um, one
of the challenges for the CFPB is that you all are working really hard to solve a huge
problem of economic inequality that’s grown since the 1950s, and that — that’s a really
tough one, and — and Neil’s point goes to that.
Um, I have a — a couple of points. Um, one is that, um, on the — the form itself in
the important questions, one of the questions is, Do I plan to remain in my home for a long
time. And as we know, people — most people are excessively optimistic. And lots of people
do plan. It doesn’t mean that they believe they’ll be able to. And I’m wondering if you
could think about that wording a little bit. Um, maybe even if there’s a statistic out
there that says, you know, The average age at which somebody is able to live independently
is X, so that, um, people realize that. Um, and on — and, again, these are comments
on what I think is great, so I don’t want to, you know — uh, I don’t want you to think
I’m overly critical of it. Um, under the alternatives, I think I would — I would take move into
a more affordable home as its own option, bolded, um, uh, and I also think it could
be good to say something about talking with family. Um, like Neil, I’ve had a number of
family members who come to me for advice about reverse mortgages. They don’t listen to me,
but they do come for advice. Um, and one of the things that — that I’ve
learned is that a lot of older people think the children will be devastated if they sell
the home; I can’t do this to the kids, and to say, Talk to your children. You know? Because
oftentimes, the children want them to sell the home and move to a place that they can
manage in terms of size and maintenance. Um, uh, if there’s a way to talk a little
bit more in here about the single disbursement — and I know that you really try not to have
cluttered documents. The — the single disbursement is a huge problem, and, um — and it’s — uh,
uh, you know, we know what the risks are, but, um, to — just to be thinking about issues
of parental abuse. So, I know of a situation where a family did
do — the — the parents did a lump-sum payment, because their child was managing their money
and said it was the right thing to do, and they haven’t heard from the child since. Um,
so these kinds of things can happen. Um, and to maybe — I — I know that you don’t
like to put in a lot of recommendations, but I think that this product is one where recommendations
could be really valuable. To have it just as a document about, These are your options,
I don’t think, is enough. So, for example, having a recommendation that says, If you’re
going to do a lump sum disbursement, you should have, you know, a tax — uh, interest-bearing
escrow account, where your projected taxes and, um — and maintenance fees and insurance
are escrowed so you will have, um, that money. And, um, that’s it. Thank you very much.
Seema and then Chi Chi. Um, thank you. Uh, so, just quickly, somewhat
related to — to what was just said, um, you know, I think this information is really great
and very important, um, to get out there. You know, I think the — what we learned from
the foreclosure crisis is that a — a lot of homeowners don’t understand the basic concepts
of equity versus the actual property itself, um, and so, I think, you know, thinking about
generational wealth — You know, my organization is, um, thinking
about this a lot, about how families really approach, uh, wealth building, um, in an — in
an intergenerational way. And, um, you know, I think emphasizing the point that, um, taking
one of these mortgages might impact their ability to leave, um, wealth for their next
generation is probably an important point to emphasize. Um, I know when we worked with
a lot of homeowners, um, that was the deciding factor for them.
So, it might prompt more homeowners to sell the home and take another direction, um, if
they understand that that’s really what’s going to impact, um, their long-term ability,
so. Thank you. Um, so, I wanted to pass along some thoughts
on reverse mortgages from my colleagues at NCLC, because as I always say publicly, I
know nothing about mortgages. Um, so, uh, one of my colleagues reports that, you know,
despite the focus on counseling as a form of consumer protection, there’s some weaknesses
in the counseling process. Um, one thing is that the counselors don’t
actually have the client’s loan documents, so at — on hand at the session so they can
provide a general analysis of the client’s financial situation, um, and reverse mortgages
in general, but they can’t really determine whether the particular product is the right
choice. Um, and the focus is on the mechanics of the reverse mortgage and the comparisons,
but they don’t address broader financial, legal, and estate planning consequences.
Um, and then, in terms of the origination documents, they’re unlikely to show how expensive
the monthly servicing fees are, but they should. Um, and then, servicing itself is a mess.
Um, they’ve heard a lot of stories, like the ones expressed today, and in fact, instead
of me taking a lot of time to go through them, um, they’ve compiled a document discussing
a whole bunch of examples of servicing abuses, which I believe will be circulated later.
I cannot take any credit for this. Um, it’s my colleagues at National Consumer Law Center,
plus, Lynn actually put a lot of time and work into that document, and a lot of the
examples are from her clients. And I just want to let the folks know that’ll be coming
along. Patty?
You know, I kind of wanted to put this a little bit from a lender’s perspective on oversight.
You know, in 2016, there were approximately 46,000 reverse mortgages done, and 80% of
that business was controlled by 10 originators. Ten. So, it seems to me that maybe we need
to just put, you know, really clear oversight, um, guidelines around the top 10 originators
and let them know that there will be numerous visits on quality and, um, overall delivery
of the product. I mean, I’m — I’m a believer of the product. I deliver the product. Um,
but my team mirrors the communities we serve. So, is that happening? So, I think stricter
oversight, the fact that they know that we’re going to be in their offices and — and — and
that it’s clear exactly what we’re looking for, from origination to servicing. Who’s
servicing them? Are they overseeing the servicer? How are — are consumers being treated post-closing
is really important. Thank you so much, Hector and CAB members,
for an enlightening conversation. So, we’re now going to switch topics and turn to Janneke
Ratcliffe, who’s the Assistant Director of Financial Education, and she’s going to share
with us some new research about financial wellbeing.
Okay, thank you, Ann and members of the CAB. It is, uh, really exciting to be here today
to present to you, uh, the latest installment in one of our major initiatives on, uh — regarding
financial education for adults, our work on financial wellbeing. I also want to acknowledge
that our office, the Office of Financial Education, partnered with the Office of Older Americans
in this work, and we also have Hector here, who is one of the co-leads on that project.
So, I will do a lot of the, uh, slides, and Hector will answer all the difficult questions. Uh, just to note that this presentation is
being made by a Consumer Financial Protection Bureau representative on behalf of the Bureau.
It does not constitute legal interpretation, guidance, or advice of the CFPB.
Okay, so to, um, put us in context, we have, uh — as you know, an essential part of the
Bureau’s mission is to empower consumers to take control of their financial lives, and
while, certainly, that requires a safe, um, and transparent marketplace, consumers also
need to be able to navigate that marketplace to achieve their own financial and life goals.
We have regularly engaged with the CAB in discussions about consumer financial education
and financial wellbeing, and your insights have — have shaped each subsequent phase
of the work. So, um, I’m sure today will be no exception. I’m really excited to get your
feedback. I may end up talking really fast to get through the material so that you all
have time to do that. Um, sorry. I want to position this work in the, um, total
arc, so far, of our financial wellbeing work. Um, as the director mentioned, we started,
in 2015, with a definition of financial wellbeing. This was motivated by the fact that across
a range of different financial education and financial capability programs trying to accomplish
all sorts of different specific things, and even across different countries, there was
a consensus that, ultimately, everyone was trying to improve people’s financial wellbeing.
What there wasn’t, was any kind of clear definition of what that really meant. So, we set out
to do that, um, in consumers’ own terms, so that we had a definition that would resonate
with them. It basically boiled down to four things: having
control over your, uh, day-to-day money management, having the capacity to absorb a potential
financial shock, um, having the financial freedom in the current moment to make spending
decisions to support your quality of life, and then as you look forward into the future,
feeling a sense of being on track to meet your long-term goals. This basically boiled
down to a sense of financial security and freedom of choice in the current moment and
when looking out to the future. So, that’s a nice, tidy definition, but what
else is clear is that what that means to me and what that might mean to any one of you
in this room, um, could be very different in a tangible way. So, the next question we
tackled was how to measure, uh, financial wellbeing.
Uh, so using state-of-the-art methods and, uh, we developed, tested, and validated this
Financial Wellbeing Scale, um, in 2016. There’s 10 questions here. They can be quickly answered
by any consumer, um, and they don’t require a lot of going back to your files to figure,
uh, your numbers out. What this scale gives you, then, is a single score, on a scale of
zero to 100, that’s robust and can be used by practitioners and by researchers to make,
um, comparisons, apples-to-apples comparisons across different programs to gauge what’s
effective, across different people to figure out who is benefiting, and across time to
gauge progress. All right. And that brings us to where we
are today, the question, what is the state of financial wellbeing in America, and as
you also see, we’re beginning to, um, move into the area of what people — what helps
people have more of it. Um, so we used the scale and a nationally representative sample
to collect the information about the state of financial wellbeing. Um, and if you want
to know all about the methodology, you can refer to Appendix C of the report or talk
to Hector, as well. Um, before we get into the, uh, headlines,
I want to say that the research we had done before suggests that financial wellbeing is
determined by an interaction of a lot of different factors. Absolutely core to financial wellbeing
is your social and economic environment. Do you have access to opportunities, to jobs,
to benefits, to sufficient income, uh, family resources? All these will be fundamental to
your financial wellbeing, um, as maybe access to financial products and services. So, I
want to start by recognizing these structural factors that may well be out of the control
of an individual and certainly outside the control of what financial educators can influence.
But what we are also interested, in particular, is to understand, as financial educators,
what knowledge and skills and attitudes and beliefs and motivations can also play into
financial wellbeing. To put all these pieces together, we’ve collected over 70 different
measures, um, that suggested to us what might be important in determining financial wellbeing
based on our research before, keeping in mind that some of these factors are fixed, some
are malleable, some are within a person’s control, and some are not.
So, we’ll get right to the results. The average financial wellbeing score for U.S. adults
is 54, so that is right there in the middle of the zero to one hundred scale, and you
can see that there is a normal distribution but a relatively wide one. Um, about a third
of adults in the U.S. have financial wellbeing scores of 50 and below, and about a third
have scores in that 51- to 60 range, right there in that middle green bar, and then about
a third have scores of 61 and above. So, I want to emphasize, one of the key findings
today is that, um, financial wellbeing scores really do reflect real differences in underlying,
um, concrete financial circumstances. Those who scored 40 and below, almost all have,
um, financial insecurity, and those who score, uh, above 70 are almost all likely to have
— uh, to be basically financial secure in a basic sense.
So, I’ll give you a little more, uh, information behind that. This shows what percentage of
people in each score bucket, with the lowest score buckets being at the top of the slide,
um, had difficulty making ends meet. Uh, overall, 43% of the respondents in our
survey reported struggling to pay bills in a typical month. So, that in itself is a pretty,
um, powerful, uh, statistic, um, as the Director had mentioned. When you look at it by financial
wellbeing score band, more than 9 out of 10 individuals with financial wellbeing scores
between 11 and 40 reported regular — having difficulty making ends meet. Um, and then,
when you go to scores above 60, it falls to less than 1 in 10.
And you see a similar, um — excuse me, build slides, sorry. There you have it. You see
a similar, uh, kind of breakout for, uh, experiencing material hardship. About a third, or 34%,
of all the consumers we surveyed reported experiencing some form of material hardship
in the past year. So, that is just over a third who reported running out of food or
worrying about running out of food, not being able to afford a place to live or medical
treatment, or having their utilities turned off. And, again, you see these stark breakouts
by the, uh, lower, uh, financial wellbeing score bands compared to the, um, middle and
then the upper score bands. Okay. So, uh, the next thing, now that we’ve
sort of had a quick look at the state of financial wellbeing in America, is to try to get into
the crux of the matter, which is, what can help people have more of it, and to explore
that. Uh, we want to look at what factors are associated with having higher or lower
financial wellbeing, so we’re going to look at comparisons of financial wellbeing for
selected subgroups by the characteristics we collected. Um, these descriptive findings
provide insight into which subgroups are faring pretty well financially and which ones are
facing greater financial challenges. Um, and so, all the differences I’m about
to present to you, uh, are statistically significant; however, it is critical to bear in mind that
they are descriptive in nature. So, we are — the — any kind of relationship between
a characteristic and financial wellbeing score does not mean there’s a causal relationship.
Any characteristic could be related to financial wellbeing for a number of reasons. Um, of
course, possibly, that factor could drive financial wellbeing, and it’s also possible
that the reverse is true, that financial wellbeing drives that factor, uh, and finally, it’s
possible there may be underlying factors that are correlated both with financial wellbeing
and that — and that characteristic. So, please keep in mind, when we compare the
financial wellbeing of two subgroups, we are not attempting to — uh, to establish the
cause or driver of financial wellbeing at this point. Um, only through further research
and controls for multiple factors, uh, will we be able to tease out those relationships,
and we’ll be looking forward to your thoughts about what those could be.
Okay, so the second major takeaway I wanted to emphasize is that, uh, financial wellbeing
scores also capture information beyond traditional financial measures. So, for example, as you’ll
see, at all income levels, financial wellbeing scores vary widely, so that you could have
somebody in a lower income group that has a financial wellbeing score higher than many
people in a higher income group, so that — so that income is clearly not the full story.
These wide and overlapping distributions suggest that even when an individual is a member of
a group that is at a relative disadvantage, there could be — and we have to sort out
what those are — compensating factors or strategies that can offer opportunities to
improve financial wellbeing. And, again, uh, future analysis can lead to better understanding
of how all these various factors interact to determine financial wellbeing.
So, let’s look at some of the characteristics, and I’m sorry for the smallness of the slide,
but, um, this also, um — I’ll try to give some words to help us interpret this. First,
we’re looking here at the individual characteristics that we, um — that we looked at and that
we examined: um, education age, physical health, health, race, ethnicity, and sex. And I’ll
talk a little bit about how to read this. The, um, graphic that you’ll see throughout
the report, it shows you that the average score is 54 for all consumers, and then it
breaks it down by different education categories, so that those with less than a high school
degree, um, have a average score of 48, whereas those with a graduate or professional degree
have an average score of 61. So, you can see, graphically, how far those, uh, differ from
the average, and you can also look at this and quickly see that financial wellbeing,
uh, on average, increases with education. It also, if you look at the age bucket, on
average, increases with age, uh, and improves — is better for people with excellent or
good health versus those who have just good to poor health.
Um, and then, perhaps somewhat surprisingly, at this descriptive level, race and ethnicity
did not have quite as strong, uh, an association with average scores, and in — in the case
of sex, it actually appears to be neutral. So, I wanted to stop there and — and use
this as — as a way to sound an example of caution interpreting the results. In our sample,
as in the general population, the average age of the female group is polled higher due
to longevity. You can also see from this picture that the — age is generally associated with
improved financial wellbeing. So, it may be very well possible that when you control for
age, you will see that women have lower financial wellbeing than men, which is consistent with
some of the research. All right. And then, uh, let’s look a little
more closely at the educational factor and also a graphic that you will see consistently
in the report, so we’ll talk about how to look at that. The — the longest distance
you’ll see for any subgroup, the — the light gray bar, covers the, uh, distance between
the 10th percentile and the 90th percentile, and then the dark gray, in the middle, shows
you the — the — the 25th to the 75th percentile. So — so, half of the respondents will have
been in that dark gray area, and then the average is shown by the number.
So, here again, you can see that, um, it goes up with age but that there’s wide — wide
distribution, uh, so that despite the big gap between, say, people with a — a graduate
degree and people with less than a high school degree, uh, about half of those with less
than high school education have similar financial wellbeing scores to those, um, with professional
degrees. So, again, while it’s correlated, it’s clearly not the whole story.
Um, similarly, we see average financial wellbeing increasing with age. Uh, that could be explained
by many factors. It could be increased asset accumulation, increased income, access to
Social Security. It could also be due to differences in expectations and goals and priorities at
different life stages that could affect subjective financial wellbeing. And, um, I also want
to invite Hector to talk about some of the things that this age distribution might indicate.
Um, just want to say that, uh, we should say, because this is a cross-sectional sample,
we don’t know, necessarily, the, uh — the — the path of an individual over their life
course in terms of their financial wellbeing. But as you can see, one thing that caught
our office attention is that as you look at the different — different age groups, the
— the — the distance between the 10th and the 90th percentile relates — remains relatively
the same. And in fact, uh — it’s hard to tell here, but it actually increases a little
bit with age. And then, there’s also that small decrease in later ages.
Uh, so we do have a — an over sample for this population, and part of our, uh, research
agenda is to explore, in more detail, those, uh, nuances.
Thank you. All right, so next, we’ll look at some of the household and family characteristics,
specifically, housing satisfaction and housing status. Um, we also — in the report, you
can look at marital status, children, and region, and, uh, by region, there was actually
no difference in average financial wellbeing scores.
So, here, what we see is that adults who report they are very satisfied with the place they
live currently have markedly higher average financial wellbeing than for those who report
being less than very satisfied, and homeowners have an average financial wellbeing higher
than both renters and those who neither rent nor own. On a related point not on the slide,
adults who spend 50% of their income or more on housing have an average financial wellbeing
score of 46, compared to 56 for those who spend 30% or less of their income on housing.
So, these findings do not necessarily mean that good and affordable housing causes financial
wellbeing, um, but I think this is an area that really calls for further analysis about
the relationship between housing and financial wellbeing.
Next, we’ll look at some of the income and employment characteristics. Again, I urge
you see the, uh, report for more detail, but I’m going to go straight to the income breakout,
uh, because, again, this is another key important takeaway. Yes, as may be expected, individuals
with higher income have, on average, higher levels of financial wellbeing; however, the
distributions, uh, for income groups are wide and overlap substantially with one another,
suggesting that factors other than income are at play.
Certainly, it will be really interesting to tease out what other factors matter. For example:
Where is it that you find low-income households with high financial wellbeing or high-income
households with low financial wellbeing? And then, I want to move into one of the most
interesting, and another key, uh, point I want to, uh, drive home is the apparent importance
of savings and safety nets. Of all the categories we examined, the biggest gap and the least
amount of variation within groups occurred for liquid savings and the ability to absorb
an unexpected expense. So, here you see, uh, financial wellbeing
score by liquid savings. On average, adults with greater savings, uh, have higher financial
wellbeing. Those with $250 in liquid savings or less have an average financial wellbeing
score of 41, compared to 68 for those with 75,000 or more in savings. So, this is a 26-point
difference and is the largest difference observed across any factor examined in this report.
Again, you should note here that the overlap within subgroups is relatively small compared
to some of the other factors, and that is, within each subgroup, the financial wellbeing
scores cluster more tightly around the average, and there’s very little overlap in the distribution
of scores for adults who have the very lowest, uh, and the very highest level.
And you sort of see a similar story when you look at, uh, the, um, capacity to absorb an
unexpected expense, that is, could you come up with $2,000 in 30 days. Uh, there’s, um,
few — very few individuals who are certain that they could come up with $2,000 are in
the lowest financial wellbeing ranges, and few who are certain that they could not come
up with that kind of money are able to report high financial wellbeing.
So, these differences suggest that financial cushions may be more closely tied to financial
wellbeing. Certainly, that — that piece about security is key here, uh, than income.
Next, we’ll take a quick look at some financial experiences. Again, um, I urge you to see
the report for more details, but here, the largest differences are based on whether an
individual has been turned down for credit, contacted by a debt collector, and the use
of certain financial products. These two negative financial experiences — being turned down
for credit or contacted by a debt collector — uh, are more common, certainly, among individuals
who are experiencing economic stability or facing serious constraints. So, again, the
relationship between these experiences and financial wellbeing may very well be the result
of underlying financial vulnerabilities. Um, however, it’s possible, as well, that
having one of these experiences could affect your sense of financial wellbeing or some
of both. It may be a bit of a cycle. Again, more to be learned.
Adults who do not have a checking or savings account, who reported using, um, non-bank,
short-term credit over the par of 12 months and who report using non-bank transaction
products all have lower financial wellbeing than their counterparts. Um, again, I don’t
want to say that this is, necessarily, causal. Finally, what financial educators and financial
capability builders, uh, want to know is, what is the role of things like financial
behaviors and skills and attitudes. What stood out was a confidence in — in one’s ability
to achieve a financial goal, which we often refer to as financial self-efficacy, um, having
a habit of savings, and effective day-to-day money management behaviors, as well as, uh,
financial knowledge and skill. Take a look at those.
Consumers with high levels of financial self-efficacy have an average financial wellbeing score
of 63 compared to those with lower confidence levels and an average score of 50. Adults
who made a habit of saving money, um — and that’s really not surprising given the findings
we had on savings themselves — is — and adults who engage in a number — in a high
number of effective money-management behaviors have higher financial wellbeing than their
counterparts. Keep in mind that several of these practices
— for example, paying your bills on time or paying off your credit card balances in
full each month, of course, are dependent on having enough money to do so. Uh, so, again,
the correlations, uh, at least in part, reflect on how simply having sufficient financial
resources leads to both better money management and higher financial wellbeing.
And we see that adults with higher levels of financial knowledge have a higher average
financial wellbeing, that’s 58, compared to 51 for adults with lower levels of financial
knowledge. It’s important — I want to point out that
there is a really high level of overlap in these different subgroups, suggesting that
this factor alone does not explain a lot. Um, there is a larger difference in average
financial wellbeing scores for adults with higher versus lower levels of financial skills.
And in this case, the actual — uh, the overlap between distributions is low, suggesting that
the skill — the skill relationship with financial wellbeing may be stronger than the knowledge
relationship. And this is, um, consistent with what we heard
when we talked to consumers and asked them, what — what knowledge was helpful to them
in their financial wellbeing. And they were much more likely to mention knowing how to
do certain things than specific financial, uh, knowledge and content. And the things
they said they wanted to know how to — that — that were helpful, the skills, were knowing
how to do your homework and your shopping and gather information, how to understand
that information and — and analyze it and use it to make a decision, and then how to
actually implement that decision and — and stick with it.
Um, and then, the nice thing about skills — and — so that’s what we tested for. But
the nice thing about skills, of course, is that they’re transferrable across different
financial transactions. So, I want to go — talk briefly about, uh,
what this means for opportunities to improve financial wellbeing for financial education
and financial capability programs. The first, uh, takeaway might be that based on, just,
what we can tell, what these findings point to is that a lot of programs seem to be on
the right track, uh, certainly with respect to programs that seek to build savings and
safety nets. That seems to be responding, uh, to something we saw here, as well as,
uh, experiences — how experiences with debt and credit seem to be strongly associated
with financial wellbeing. And then, you know, the good news is, there seem to be positive
relationships with, uh, attitudes, behaviors, skills, and knowledge that, um, is the domain
of financial education. Um, there is good news, a growing body of
evidence, about effective ways to move the needle on these things. Our recent release
of “Effective Financial Education: Five Principles and How to Use Them,” which we shared with
the CAB, um, before the release of that paper, documents the evidence of many of these strategies
working, and we hope that that will encourage, uh, innovation and program design and delivery
and, um, as always, further research. Okay, so that was the summary of the findings,
um, of, uh — of highlights of the findings anyway, and I did want to mention that there
are more things that we released with this. Simultaneously, we released the data set behind
this: um, 217 variables, including the Financial Wellbeing Scale and all the characteristics
that we reviewed here. Um, we hope that researchers and policymakers and practitioners and any
one of you in this room will, um — can use this data set to explore some of these relationships,
as well, so that we can all help move individuals along a pathway to greater financial wellbeing.
And then, um, we also released, as members of the CAB had suggested to us when we first
shared with you about the scale — we have released an interactive tool for consumers
to find out their own financial wellbeing score, so that they can go online, they can
answer the 10 questions, uh, they can get their score, and then they will be, uh, pointed
to resources that can help them improve their financial wellbeing depending on what their
particular interests are. So, here we are. Uh, today, we’re asking the
CAB to help us plot the — the way forward with all this rich data and your, um, insights.
Uh, specific questions that, uh, we would like your feedback on include, you know, first
of all, if you have any questions that we can answer — that Hector can answer — um,
which of the survey — survey findings really resonate with you, and maybe what were new
insights for you, um, what this triggers in terms of ideas for research questions that
can be explored with this data, how the findings and data and consumer tool can be useful to
you in your work, and what you would suggest, uh, for the CFPB to put to work the — the
findings and the tool going forward, and thank you.
Thank you so much Janneke. That’s so much amazing information, so lots to think about.
And so, I’m going to open it up for discussion, and, Patty, would you like to lead us off? Oh, I thought you did. Ohad?
Thank you very much for the research, very, very interesting and helpful. I was — maybe
I misunderstood, um, what was said, but I was a little bit surprised to see that region
and community seem to not influence the self-perception of financial wellbeing. There’s some research
that points that perception of wellbeing is relative to the community that you live in.
What are your thoughts there? So, um, Janneke, do you want to answer that? Uh, so — so we used a Census region, and
they’re pretty big. So, you have, you know, uh, diversity of communities there, and that
basically what’s, uh — those nuances. But there is the housing satisfaction question,
and there are other variables in this survey about the community has services. Uh, there’s
job opportunities, and those all have, uh, strong relationships with financial wellbeing.
And I’m happy to provide you the more specific details, uh, but those, uh, results are in
the appendix, um, the actual, uh, average score, as well as how the — the — the answers
were distributed. Ruhi?
So, yeah, mine would be a follow-up, as well, and we can talk offline. Uh, if you can — if
you broke up the majority non-white Census tracts and how that played out, and, you know,
housing values have changed and not changed and risen and not risen. You know, even if
you look 50 years or, you know, 20, or even the last 10 years, you know, wealth has — how
wealth has come back or not come back changes within communities of color and, uh, you know,
what — as opposed to white communities. Uh, my — my — my thought — my, sort of,
comment on this, what’s — I’m really — this is amazing, because, um, we, um — Rochester
has the highest child poverty for — for, you know, the — one of the top hundred metropolitan
statistical areas in the country, and I think we’re fourth for adult poverty. And we have
a — a — a — a — it’s called a poverty initiative, and we’re looking at a whole bunch
of these factors and playing things in. Um, and I was talking to Dr. Slaughter. Uh,
when I first started doing access to credit work, in the early ’90s, we could take someone
making $25,000 a year, you — a single mom, and make her — turn her into a homeowner.
She will be — we could, you know, put her into IDAs, you know, individual development
accounts, with savings of hers, with help, and we could get her out of expensive, not-good
housing, rental housing, into good homeownership, which did build some equity. And, again, that
varied, depending on where you bought and how the subprime prices played out for you.
Now, when I take someone at $25,000 — and I’m actually going to be working on a report
on this in early 2018 — I’ve got to figure out, I need to have that person have financial
capability training, so that when she gets into a checking account, she’s not ending
up in overdraft fees, or that when she buys that first used car to go to get a job and
keep her job, because, you know, public transportation doesn’t work for her, that she’s not being
set up to essentially fail for, you know, probably, an indefinite period of time when
she’s ending up with that. So, um, this is really, um, you know, very
helpful work. And so the — the — the main policy thing that I’m getting out of this
is that not having that safety net — because that’s that — it’s that emergency, where
you end up having to — having done absolutely everything right, I mean, and that’s what’s
— You know, in the old days, we were like, Hey, you’re making $25,000 a year. We can
show you how to pay your bills so you build assets.
Now you’re making $25,000 a year, and you can do absolutely everything right, and you
still can’t make your bill — make your bills, you know? And — and that’s just heartbreaking.
You know, you can have two or three jobs, and you’re doing absolutely everything right,
and you’re still falling behind. And how do we — you know, how do we turn
that income inequality, uh, you know, short of all of us becoming wage justice attorneys,
which I have considered doing and — uh, but — but — but the — You know, you cannot,
if you’re making — if you’re low or moderate income, you — we have to make illegal bad,
abusive products. You cannot educate someone, uh, who has no choices and who — who has
their back against a wall to not make — which, you know —
And — and — and — and so, that’s where, I think, you know, this is a really important
role that we play. Um, you know, there’s a lot of work to continue to be done. I mean,
I’m grateful for the payday rule, and now I need to understand, okay, you’re not going
to get a bad loan anymore. Hey, financial institution, hey, bank, how am I going to
make sure that you give — give a good loan out that’s affordable and that can be paid
over a period of time and that’s building assets and credit? So, that — to me, that
— that safety net, that — that’s a huge — I mean, you know — you know, like, we
— like, I’ve been saying things for 10 or 15 years, but now I say — now I have data
that backs up what I think I know from talking to my clients. So, thank — thank you.
Thanks, Ruhi, and I’ll jump in just a quick — One of the things that struck me, and it
sort of goes a little counter to Ruhi’s comment, which, perhaps, could be that tighter regional
impact, is that your data doesn’t show income as being the defining factor.
Um, and one thought — we — we did a study, in Texas, on a — an affordable, small-dollar
loan program that was accessible through the workplace, and really, anybody, no matter
their credit score, could access the program. And what we found in people’s perception of
the impact of the loan on their financial wellbeing was, over a 1-year period of time,
they weren’t able to build savings but were able to reduce debt, which we thought was
a pretty powerful finding given the short time period of the impact.
And it might be interesting, as a next study point, to look at what kinds of financial
products have measurable impacts on people’s financial wellbeing, so that, you know, what
— will — do beneficial — or products that don’t have some of the pitfalls that we’ve
talked about in these conversations, how do they move people forward, and what are those
products that are most powerful in doing that. Now, Brent and then Sylvia.
And I think Dr. Howard, too. Yeah. Um, I think this is a great study. I — I took the test,
and I scored myself down by misreading a question, so I retook it. But, um, I’m going to introduce a concept,
just, based on a lot of things that a lot of us know about U.S. Financial Diaries’ volatility:
the inability to smooth income and expenses throughout a year, even — even a few months,
through a summer or — or holiday season. And, um, what — what we found, is, uh, Americans
have, uh, moved to this idea of a two-income family or two income earners in a setting.
So, I just want to introduce — uh, I’m going to use a musical analogy. You have that progress
bar that looks like a little barometer or a thermostat. I’m going to suggest something
called the Beatles barometer, and that’s, I get by financially with a little help from
my friends. So, I don’t know how this can be done, but
this idea of income pooling and pooling of paying expenses, this is — could be multigenerational,
as a lot of, um, uh, different ethnic groups do, pool money more — more as a community
and, uh — but people sometimes need to work with others to get by. And if there is a way
to have a supplement to this tool or a — something standing alongside that allows people to input
as a couple or three or four people — You know, um, HUD — or Fannie Mae, I think,
even made some changes to mortgage eligibility to allow income from boarders in a home and,
uh, even somebody living outside a home. Some of that money can be counted as eligibility.
So, this is the new dynamic, I think, in America, and it’s probably an old dynamic of how people
have gotten by. And it also applies to the aging issues we
just talked about earlier, because then you have a death in a family. You — you know,
a two-income Social Security check becomes one, so you actually have a drop. And co-senior
housing’s another issue, too. So, I just want you to think about, uh, you know, helping
people get by with the help from their friends and family.
I’m not sure who’s going to answer this question, whether it’s Hector or Janneke, but, um, we
recently incorporated the tool into all of our housing education and counseling and financial
literacy classes. So we’ll be able to report back, you know, uh, once someone gets through
the different programs. Um, my — my question is this, is more for
clarification: In the research that was done, was the fact that those who had, um, college
degrees or, um, beyond — and, uh, obviously, they were earning more income — was the education,
uh, and the income taken into account because of their higher potential to — uh, the potential
to earn higher income? Was that part of it, as well?
So, in this particular presentation of the statistics, it’s really meant to whet people’s
appetite to get down to those further levels and to, sort of, do, um, multivariate analysis
that would take into account education and income and other factors like that all at
once to see how they all play together. I will say that one value of what you’re doing,
uh, with your clients is that, precisely, you will be able to look at that longitudinal,
uh, piece, uh, measuring, uh, multiple times, and that’s where you see the — the effects
of, uh — And the — the issue of earnings potential, you have to look at in a survey,
probably, of 30-, 40 years in people’s lives, but in your case, an intervention that does
take time and see how that associates. Uh, I — I really, uh, you know, appreciate
a lot of the — the feedback, uh, here today, particularly, uh, on the — on — on the idea
of the role of family and — and resources, because, uh, the measure, again, what it shows
is that it is more than what, um — I used to work a lot on — on — on access to Medicaid
and, uh, food stamps, and I know that income is just one measure of what people are experiencing,
and — and — and those programs provide significant support. And so — so, I think financial will
be, maybe, capturing all of those contexts, all of those things that the consumer knows
that they have — family and others — and — and that’s a more comprehensive measure.
Sylvia mentioned using the, uh, scale in a — before and after — in a program setting,
and that’s certainly of great value. Thank you, uh, for being an early adopter there.
I want to highlight two other uses. We are aware of a few employers who are using it
to both engage and learn about the status of their workforce and what stresses they
might be under and to think about their own workplace financial, uh, fitness programs,
and, you know, you’ve got to know where your workforce is before you can think about what
you want to give them. And the other is this potential to use it
for local needs assessments, uh, both for local officials and for nonprofits and community
foundations who are looking at learning more about the local, um, area.
Brian, Neil, and then Howard. Thank you, Janneke. It’s a great piece of
research. It’s great to see how it’s progressed, I think, since the last time you spoke about,
uh — about using this tool, and I — I had two questions for you.
One is, is, are you considering, maybe, how this could be used to attract people, uh,
to the CFPB’s content? Uh, it’s a tremendous amount of great content. It’s well written,
and it’s very approachable, and we saw, just, you know, the latest piece, I think, from
Hector and his team. And it would seem that this could be the entry point, you know, for
a lot of that content. Uh, you know, you’ve — you’ve got to change
your batteries in your smoke alarm at Daylight Savings Time, and, uh, we all know we got
to get a flu shot in the fall. Um, and so, it would be — uh, uh, and, you know, you’ve
got to lose weight come the first of the year. It would be great to see — It would be great to see, you know, something
around, okay, it’s the first of the year. In addition to losing weight, it’s time for
me to measure my financial wellbeing and — and, you know, the resources the that CFPB put
to bear. So, I’m kind of wondering if — what consideration is given to — to making this
the gateway to the — to the content. And the second thing is, I’m — I’m wondering,
uh, on the backend of it, um, is there any thought given to, now, how to make it a prescriptive,
uh, next step? And I saw you had — you had links and research, and they say, Now, if
you want to, um, but if you take it and you say, Okay, your score is 54; here’s some reasons
why, and then, maybe, a more explicit channeling into the next step of, what do you need to
do next. Well, I need to get a budget or I need to get a checking account, you know,
sort of depending on those circumstances — if you’d — if you’d given any thought, um, to,
uh — to kind of the next steps, or, you know, guiding them to resources in their area, you
know, many of which are around this table and — and kind of pointing that out. So,
just kind of wondering what — what’s next. So, thank you. Those are all great ideas,
and, um, I think you — you’re painting a really — a — a picture that’s consistent
with our vision, and I really like some of the tactical ideas about how to get us there.
So, we’ll sort of be — we’ll be tracking. This thing just came out recently, so we’ll
be tracking the — kind of, the hits and what people do from there, and then looking for
ways to improve it, and I really, uh — I really appreciate that — that feedback and
those ideas. Thanks. I would just add that this is probably a perfect,
uh, thing to do in their families and during Thanksgiving. Uh, it’s, uh, one of those challenges,
like, What is your financial — Uh, we — we have done it with, uh, elder
financial expectation. I think this would be a very fun one, to — the family to do.
I — I think the — one of the, uh — the insights here that, uh, uh, you know, I appreciate
is the potential distinction between cash flow and income, and I think Ruhi mentioned
that, that that would be a place to kind of dig deeper and understand more about, like,
what — what was under that and, uh — so people could actually then benefit from it.
I’m also encouraged that your, uh, audience from the — from — I guess from the last
time we were here, uh, which was, kind of, the consumer has been broadened out to include
employers and potentially community groups and — and all that. I, uh, wonder — so,
uh, given the, uh, Wells Fargo scandal, okay, I think that, uh, one of the things that I
know that banks and financial institutions is, uh, laboring with now is, is that, uh,
sales is considered to be a bad thing, right? Okay?
Uh, and could the potential audience for a dialogue here, for, uh — for banks or other
financial institutions, be financial wellbeing as a platform to actually think about a, uh
— a selling or even a sales management strategy that, uh, would — could be woven into, uh,
incentive plans and other ways to kind of manage that effort to the benefit of the customers
and the financial, uh, institution shareholders? Uh, the other, uh, place that I wonder about
in terms of the audience: Are you using these insights, as they evolve, to inform the Bureau’s
approach to operationalizing rulemaking priorities around overdrafts and stuff? So, yesterday,
in the closed session, we talked a little bit about overdraft research and stuff like
that. This — there’s a piece here that I think has some gold in it that might actually
drive some of the priorities you might have in terms of influencing, uh, overdraft, uh,
users in those groups. Uh, I think your — the point you made, uh,
Neil, just now, about, is it possible that banks could be pushed, nudged, or themselves
decide to go in the direction of starting to take their bearings, not just by what they
sell to their customers but by whether the overall set of services they’re providing
to their customers over time is raising their customers’ overall financial wellbeing, that
that’s — that’s extremely interesting. And, uh, uh, I don’t know, uh, what would
get us from here to there, but it would be a very different mindset, and it would be,
uh, a very, uh, beneficial mindset, it seems to me, uh, and this is — There are a lot
of community banks and credit unions who talk in these terms, and I think, actually, consciously,
uh, try to think in these terms, uh, but whether we could — we could adapt the measure and
have that be a way to, uh, actually have people be thinking around, how do they do this, uh,
with their customers, that that’s — that’s kind of interesting and promising.
Yeah, the — the interesting thing, to me, is, is that financial wellbeing research has
been around for a while, and a good deal of financial — larger financial institutions
had access — have — and have access to research like this that, uh, you know, could potentially
inform their strategies. I think that, uh, you know, as you begin to try to influence,
kind of, behaviors in this realm, uh, it would be good to, perhaps, remind people that this
could be an approach that would be — could be effective.
Howard? Thank you. Uh, just a few comments. First
of all, I think the work that, uh, CFPB is doing in this area is very, very excellent.
Uh, we at Habitat for Humanity of Greater Pittsburgh and around the country work with
many of the most vulnerable populations, uh, in America with regards to financial wellness.
One of the key things that we have found, that there is no standard definition of what
financial wellbeing is. So, for one sector, it’s one set of — of definitions, and for
another, it’s different. So, I think some additional clarity around — or some ideas
as to how we can make this term, in and of itself, uh, uniquely universal would be helpful,
because when we talk to consumers about homeownership, uh, some believe that they are financially
well, uh, and they — they are not, given the definitions that we have used.
Uh, we also realize and recognize that there is a serious, disproportionate level of, uh,
net worth, uh, when we look at the different ethnic strategies that we are focused on.
African Americans and other populations still are at the lower end of, uh, this area, and
we have found that there have been many, many challenges in working with these groups. And
so, I think a way in which we can provide more information to groups that are, in some
cases, more vulnerable than others, uh, is still, certainly, very, very important.
There was a recent article out that actually stated that, uh, there were, uh, questions
asked of certain consumers, and the question was, Could you come up with $400 — not 2,000
— $400, uh, in an immediate emergency? And the majority of those who were asked could
not even come up with $400. So, this issue is very, very troubling and something that
— that we have to work on. Um, when, uh, I did some research on financial
literacy, we did a, uh — a focus group, and the hypothesis was that if we took young people
— because we believe that focusing on this area at the youngest possible age, not meaning
kids, uh, in grade school but, uh, about to go to college — Uh, we did some training
with some students at one of the universities in Pittsburgh, and we took students who had
no real knowledge of financial information at all. And the hypothesis was that if we
trained these students, who had no experience, and gave them a set of data, information,
and took one week of training, the hypothesis was that we would definitely see an increase
in financial education and awareness. And the hypothesis was proven, uh, that that level
of information, just for a week, makes a significant difference for students.
So, uh, while this is not something that, uh, CFPB can do in and of itself, these are
some of the ways in which we can push down this financial education to a level that will
help those students going to college. We all know, or we should know, that there are many
students who are freshmen in universities that have never had any kind of financial
literacy training or education. And if that doesn’t continue — if that continues to occur,
we’ll continue to see a dearth of, uh, significant, financially astute students and then, obviously,
uh, young adults. Um, the other — the other concern that I
think is important is, when we talk about, uh, working with individuals, we also have
to be inclusive of families, as well. At Habitat, we work with individuals, and we work with
families, and I think if we can make some of the information very, very basic so that
more people may have an understanding, while all the scores are correct — you have FICO
scores, you have a wellness score — uh, if we could make it very basic, so people can
understand it more, uh, effectively, I think that helps, and then, to utilize others who
have had some success in these areas to help bring about some of the change. I think those
are some of the things that would also be very, very helpful for some of the people
we are trying to work with and effect positive change.
This is very good information. This is a very, very difficult and — difficult and tough
challenge, and I’m glad that CFPB is working on this, and I think there can be some substantive
change by making some very, very basic, new strategies and agendas for people who are
vulnerable in this area. If I could just jump in — I don’t want to
take us off course, off of the adult financial wellbeing work, but you mentioned, uh, young
adults and youth financial education. We use this, um, definition and research on adult
financial wellbeing to sort of back into, what are the attitudes, knowledge, skills,
um, that adults have that — that — that indicates are associated with financial wellbeing
to then back into, what are the building blocks of those things throughout the developmental
cycle. So, on the youth side, we’ve created, uh,
a — a set of — a report on a set of building blocks and the — the characteristics — they
may not even be financial in nature, but the kind of things you want to build in at each
age group and some tools to support that. And so, um, we have some other initiatives
on youth financial education, um, which, perhaps, we can share with the CAB at a later date.
Judy, Lisa, and then Julie. So, you ended your presentation with a question
about things that we’d be interested in having you take a deeper dive in, and one of them
was, uh, the relationship between housing and financial wellbeing. And that would be
of great interest to me, uh, especially in terms of the percentage of, uh, payment — uh,
percentage of people’s income that they’re spending on their housing and if — if that
has any relationship to financial wellbeing or not or whether having stable housing has
any relationship. I think we all have a gut feeling what the answer is, but it would be
very helpful to — to know that. And then, my other two were questions that
were really sparked by things other people said. Um, to what extent did you distinguish
in — in — When you first brought this out, I went through the — the little test. I don’t
remember now what, exactly, all the questions were, but to what extent did you make any
distinction between whether the income being required was two person or — or — or just
the individual’s income? Uh, because that does lead to, you know, questions about, if
you lost this other income, you know, would your financial wellbeing stay the same.
And then, again, uh, related to something Ann said, um, to what extent did you look
at, if at all, whether people were saving but also whether they were reducing their
debt? So, we do have, um, in both, uh, the survey
questions, about, um, working on — on financial plans like, uh, paying off debt, but also,
we had a question of individual versus household income. Uh, in the questionnaire itself, the
— the questions about financial wellbeing don’t have any, uh, questions that are specific
to providing income. Um, they — they do, uh — they do have two particular, uh, items.
One is that they ask you your age, and that — they also ask you how you took the survey,
the — the questionnaire. And the reason for that is to adjust the scores accordingly based
on what we found were meaningful ways of answering those questions.
But, um, I think your — your question, in particular, getting at the — the difference
between treating this as an individual versus a family — um, that was an inherent, um,
uh, factor in the development of the scale, which is, let’s pick — The — the process
of choosing those 10 questions was an iterative process that began with 50 questions and were
narrowed down to those, uh, 10, and those were the questions that were — we call them
the most discriminatory, so questions that, uh, people — made people think, made people,
um, use their — This is subjective. It is a subjective measure.
So, when you answer those questions, uh, if I’m a single individual, um, living alone,
I would be answering those based on — on what I have, uh, as my resources in my household.
Uh, and if you’re someone who’s married, uh, most likely, that’s your — your thinking,
so. Uh, but we also know, as Janneke said, this
is subjective but very strongly based on people’s reality. Uh, it’s what people know about their
— their day-to-day, uh, struggles and their possibilities.
Yeah, to just, maybe, reiterate what Hector said in a slightly different way, if it’s
helpful, that, really, we’re hoping — Well, the scale has been tested, and it seems like
it’s a way to create a single number, out of all these disparate variables, which it
— it would almost be impossible for people to collect the specific data behind all of
these issues. This is where it all comes together for a person and how they describe how their
financial condition and their capability affords them with security and freedom of choice in
the current moment and into the future. Uh, I first want to just applaud you guys
for working to operationalize something that’s really hard to operationalize, um, and also,
I think, for really valuably shifting the conversation from one about whether someone
uses a bank or not to this much more holistic idea and conversation about financial wellbeing,
which, I think, is the — the real goal. Um, you asked about ways that we might use
this in our work and other kinds of, um, questions that might come after this or were future
research. Um, I applaud both what Brent and Ann said about both income volatility and
trying to understand how different products or services can move the needle for people.
I also, um — and I haven’t worked out how you would do this yet, but I think this could
be the beginning of really thinking about internal — you know, kind of behavioral versus,
um, external factors and trying to understand, uh, to what extent financial wellbeing is
governed by the things that people can control versus the things that they can’t control.
Um, uh, and I would certainly — uh, I certainly imagine myself using this, incorporating this
with my research — uh, with my own research, you know, especially the longitudinal aspects.
I wonder, and this, um, I think, connects with something Brian said, about, um, steering
people to content. I wonder if there would be useful partnerships with, say, a Credit
Karma or even a NerdWallet, you know, where, um, people are kind of — you’ve got an audience
of people who are kind of trying to understand, say, their credit score or how they could
use products better, where they could get to that tool and then be directed to content,
you know, so having that tool be delivered as part of, um, an app or a service that people
are going to for other reasons. Thank you very much for the research. Um,
I primarily work with single mothers, and we — around financial education, financial
coaching, and what we’ve really seen is that when they start to have hope that things can
get better, that’s when they are willing to take risks to change their behavior. Our focus
is on managing their monthly cash flow, and as they start to do this and they stop paying
late fees, and then, instead of having too much month and not enough money, they start
to have enough money and — to correspond with the — with the month, we just see huge
behavior changes. And then, the other thing we see is that as
it builds their financial confidence, as that skill builds, their knowledge builds, it also
builds confidence in other areas of their life, so they feel like their kids are acting
better. It’s like, Well, you’re not stressed out of your mind.
Um, so I think by not having the wolves at their door, by having hope, by seeing progress
in their lives, they’re — they’re taking much bigger steps. They’re going back to school.
Um, they’re getting promotions at their work. So, I think all these things kind of build
together, um, to move people forward and to — to participate in the American Dream.
And lastly, I’d — I’d like to think about, how do we incentivize, maybe, savings and
incentivize building saving nets or safety nets. Are there ways to — to get people to
say — I know there’s a Save to Win. We were the second state in the country to get Save
to Win, uh, around credit unions. But I just think this is really, really important, and
I just see the quality of lives of the low-income families I work with change dramatically when
they start to have financial confidence, when they start to feel like they’re moving forward.
So, thank you for your work. Let’s continue to build this together.
Kathleen, Chi Chi, and Will. Uh, I — I spend, um, some time with people
who receive grants to do work, um, in communities, and, um — and, um, as, probably, many people
here know, especially those who depend on grants, that there’s been a — a real push
towards, um, standards to show that you actually have made a difference, which is really difficult
to do when you’re talking about community development, consumer counseling. Um, and,
uh — and then, grant, uh, makers get nervous about impact, you know, are these dollars
really making a difference. And this tool would be incredibly effective,
not only as it exists, but I can see ways in which it could be changed, um, to — for
different situations. So, I really encourage you to get — uh, if — if possible, for you
to get, as much as possible, um, into, uh, entities that — that are obtaining grants.
Um, the second thing is, um, the — uh, following up on something that Brent said. I think that
— that the questions of income and outflows, it’s both who in the — in the family is contributing
money, or at least whether the income should include all of the money that’s going in the
household, but also, if you look at things like the residual income test for the FHA
and the VA, they look at, also, how many people are dependent on the income. So, if you have
one person with a severe disability, a lot of income is going to be going towards that,
um, caretaking. Um, I had a statistical question. Um, it seems
that this 217 variables, um — and what you said, Janneke, about, um, uh, multivariate
analysis — I assume you’re — this is — the data isn’t big enough to do regression. Yeah. Okay.
It is big enough to do regression. Um, we are undertaking some of that ourselves, but
I don’t think we can get through it all alone. So, again, we’re urging others to take this
up. Um, I don’t know if you want to mention something about the sampling that allowed
for — Yeah. So, we have a sample of about, uh, 6,000,
and, uh, the over sample, again, of the, uh, older — 62-and-older, uh, population. And
it’s true that you — you cannot run a regression with 200 variables, uh, but some of those
variables are, um — are part of a concept of a, uh, scale. So — so you have, for instance,
a scale, a financial scale, and those 10 become just 1 number.
And so — so, there are, um, methods to — to handle some of those. And some of these are
not just appropriate ideas; they’re theoretically in the model, or — or there are — or they’re
competing — they’re trying to mesh with the same items. So — so, there are strategies
to — to narrow down, but yeah, it is appropriate, uh, for modeling and — and — and, uh, we
can talk, uh, in detail on what type of model we’re using for understanding these relationships.
Great, and I have just one last question, which is, um, I don’t remember a question
on the — in fact, I know there’s no question on the wellbeing scale about your actual income.
So, where did that figure come from? Um, there is — No, uh, uh, the — the — the
scale itself, um, doesn’t include income. The — the survey, uh, which was asked, uh,
to those 6,000 individuals, it had a battery of questions on — on income and other factors.
So, that’s an objective measure not a subjective measure?
Well, it is still self-reported — Okay.
— um, with its errors and — Thank you.
And so, I just want to say that this is the opportunity that this scale has for — to
be connected to other surveys. So, we — we know already that the, uh, University of Southern
California, in their Understanding American panel, uh, has, uh, our scale included. And
they have a battery of questions on many other issues that are not, uh, included in our surveys,
uh, more detailed information on retirement issues but also on numeracy, other sources
that are of interest to — to — to all of you.
Uh, and also, uh, we have, uh, groups that are interested, also, in using it for more
administrative purposes, so connecting it with actual information on savings in a 401(k).
Uh, so we’re — you know, this is part of the outreach, uh, for this scale.
Um, so, great research, of — again, of course, from the — the CFPB, um, and great research
on the last report, too. I forgot to thank you for that. Um, I’m really looking forward
to reading the entire report. I’m especially, um, interested in — in seeing
the correlations on race, because, um, your finding on the strongest correlation between
liquid assets and, um — and financial wellbeing, of course, made me think immediately of the
racial wealth gap and the — the research showing that, you know, the average white
family has about $100,000 in assets, and, um, African American families and Latino families
have a lot less, uh, 7,000 or 8,000, and, uh, you know, something that Dr. Slaughter,
um, talked about and, uh, Ruhi alluded to. Um, you know, and that, um, wealth — that
wealth gap always makes me, um — My theory is that it’s responsible for a lot of the
other disparities you see economically. Um, the fact that, you know, credit scores, um,
are lower for certain groups of color, uh, as a group, um, you know, that’s probably
due to not having enough assets in emergencies to pay those bills to avoid becoming a debt
collection item or a collection lawsuit. Um, and this actually kind of — that finding
about liquid assets, um, kind of gave me hope because, you know, when you look at $100,000
versus $7,000 or $8,000, you’re like, Oh, my god, how — how do we close that gap? And,
you know, there’s new research saying that’s going to go to zero at one point. And, you
know, what this makes me realize is that, you know, it — it’s not making up $80,000,
$90,000; it’s — it’s just getting a, you know, $400 or $1,000 worth of a savings cushion
that could really eliminate some of those disparities.
And so, Ann, your talk about a product that would help, you know, reduce that, even if
it doesn’t increase asset, and — and, Neil, your point that maybe, you know, banks should
be encouraged to do this, um, you know, I would definitely echo that and remind the
banks out there and the public that, um, you know, these — these racial wealth gaps — This
country is about to become majority minority, and if we don’t close those gaps, or at least
we don’t get the — that — that 2,000 cushion — dollar cushion to improve financial wellbeing,
you know, nobody’s going to be making a lot of money.
Um, and so, you know, maybe, um, you know, in terms of financial education literacy — If
— if — if you can only focus on one point — you know, make it simple — it’s — you
know, have that — You know, focus on $400. Focus on that $400 cushion.
Just want to say, uh, so — so, yes, uh, uh, so Hispanic is a — a — an area of interest
to me to pursue the — the — those distinctions between ethnicity and — and race. Uh, we
found here there’s — there’s so many, uh, hypothesis that — that we could, uh, think
of, like the role of family, community, uh, and certainly, even the meaning of financial
wellbeing, uh, um, itself and — and what, uh — what — how you consider the future,
what are the type of risks that you’re exposed. And all of those may be part of — of what
we explain, those distinctions, but I agree with you, when you look at the — the — the
score by level of savings, those first few buckets, the — the — the score goes up so
quickly. Already at a — uh, having just a thousand, you’re already at — at a score
of 52. So — so, yeah, like, targeting that is great.
Uh, I also just want to mention — I — I forgot to say that we are also working on
a project with, uh, Catalyst, with Credit Karma, where we will be able to understand
the relationship of this score with a credit score, and we also will be, uh, able to talk
about, uh, other characteristics of consumers. And I think that that’s, uh — that would
be an — a — a huge contribution, again, to this research agenda.
Right. I think it’s important to note that banks are — are already part of the solution,
um, that we provide a great deal of, um, education, uh, proactively. We work with, uh, not — not-for-profits,
uh, to deliver it. And I think if we actually, uh, stepped back and tabulated, uh, all the
education that’s been developed, uh, by financial institutions, uh, and used that as an opportunity
to, um, work with, uh, not-for-profits, I think you’d be surprised at not only the depth,
uh, but also the quality of what’s out there. So, I think that’s the first thing.
Uh, secondly, I think it’s important to note that, you know, banks — a — a healthy consumer
is, uh, very important to us, uh, so there — there is no disconnect between the banking
industry and, um, uh, kind of, the desire, uh, to do this. And I can tell you, at Citibank,
it’s something we take seriously, uh, both with, uh, what we — what we already have
developed, uh, both for adults but also for, uh, young adults, uh, from a saving and, uh,
education standpoint. So — so, William, one thing you should, uh,
be aware of is, the, uh, Consumer Bureau has sought to work in partnership with financial
institutions on financial education, uh, and we’ve had some — we’ve had some success with
that. Uh, we organized a partnership with Financial Services Roundtable, uh, uh, 2-
or 3 years ago, uh, and we did, uh, push forward on, uh, financial education, uh, efforts jointly.
One of the things we came to see through that, which we were aware of before, but it really
kind of documented it in a much more tangible way, was, as you say, just how much financial
education is being undertaken by individual institutions and by — and by trade associations.
But, uh, you know, enormously, across the country, the largest banks, the smaller banks,
they’re all — the smaller banks are very involved in their communities, and the larger
banks have — have foundation and other efforts of this kind.
What we — what we found, uh, that — that was something that we think, uh, is — could
be improved upon is, so many people have lots of disparate, little efforts. It feels a little
bit like the, sort of, peanut butter approach, where lots of people do — do little things.
Now — now, certain — uh, a number of institutions were doing very similar things and using some
of the same, uh, you know, Jump Start, uh, or, uh, uh, uh, what’s the, uh, Enterprise,
um, uh, Junior Achievement programs. Uh, there — there were certain particular programs
that showed up a lot of different places, so they’re providing a lot of support to — to
— to a lot of those. But there’s lots of very disparate, fragmented efforts.
It would be great if there were a way to organize it better, and this bureau seems to be, uh,
the right place to look to try to organize some of that better. On the other hand, there
will always be individual efforts by individual institutions. So, uh — but there is a great
deal that goes on; you’re absolutely right about that, and I’m sure all of it makes some
difference. Uh, again, we continue to think we need a
more organized approach in this country, and almost certainly, that is getting into K-12
across the country. And that’s going to require a lot of help and effort and support at the
state and local level, where the Consumer Bureau, as a federal agency, is just not in
a position to dictate any of that. Uh, and it needs to be more of a — a groundswell
of effort across the country, with financial institution executives being leading voices
in that if they want to be, uh, in their — in their areas. And state banking associations,
we’ve urged them to push hard on their legislatures, uh, and some of them are and some of them
aren’t. Thank you. As, um, former Chairman of the
Consumer Bankers’ Association, why don’t I take as a, um, takeaway, uh, to work with
the staff and, uh, see if we can maybe, uh, tabulate and bring it together, uh, from a
— a — maybe a little better organized and, um, uh — so it can actually be a tool for
others to use. Thank you. And this partnership showed that even though
we might disagree on some issues, we can certainly agree fully on other issues and work very
closely together, and, uh, there’s no reason why that couldn’t be the case.
Um, on the issue of, uh, what the financial industry is doing, it’s very helpful and promising
that the industry’s making that same shift that this research shows is so needed, from
the delivery of a pile of facts to the delivery of opportunities to practice and develop skills
that can be used again and again. And I commend you, also, to have a look at the FDIC’s work
on, uh, savings accounts, banks in schools, and other forms of savings accounts for, uh,
young people who are too young to contract, so under 16s in particular.
A lot of smaller banks participated in that. That is public on their website, and they
did that as part of a partnership with us. We’re doing certain things involving young
people, and they’re doing certain things involving young people. And this idea that kids get
used to, uh, making their deposit every week or every month, uh, in the classroom and that
some of the young people actually got job opportunities out of it in the summer with
the local banks is very promising. Thank you. Thank you so much to the CAB members, to staff.
I think we could talk for many more hours about these engaging topics, and I think it
just shows how interesting, innovative, and meaningful the research the CFPB is doing
on such a variety of topics. So, we’re now going to break for lunch, and we’ll resume
the meeting later this afternoon, at 2:30 p.m. Thank you very much. Oh, I’m — Oh, I’m sorry, 2:00 p.m.

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