Washington, DC – CUAC Meeting on 09/07/2017
Welcome to the Consumer Financial Protection
Bureau’s meeting of its Credit Union Advisory Council, or CUAC. 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.
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 Consumer Bureau’s headquarters
in Washington, D.C. This is the Advisory Council’s second 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 Bureau’s website. You can also follow
CFPB on Facebook and Twitter. Let me spend a few minutes telling you about
what you can expect at today’s meeting. First, I’ll introduce the Bureau’s CUAC members.
Then, the Consumer Bureau’s director, Richard Cordray, will provide opening remarks. Following
the director’s remarks, CUAC Chair David Seely will conduct the meeting. Chair Seely will
introduce Gregory Evans, Senior Counsel in the Office of Regulations; David Low, Economist
in the Office of Research; Gary Stein, Deputy Assistant Director in Card, Payment, and Deposit
Markets; and Eva Nagypal. The four will lead a discussion about the Bureau’s Know Before
You Owe work related to overdraft protection. Following the discussion, the Advisory Council
will hear from Daniel Dodd-Ramirez and Olivia Calderon, respectively the assistant director
and chief strategist for special populations for the Office of Financial Empowerment. The
two will lead a discussion about the Bureau’s financial empowerment initiatives. The meeting
will then adjourn at approximately 5:15 p.m. The Bureau established a Credit Union Advisory
Council to include representatives of credit unions from across the U.S. The CUAC is charged
with providing substantive information, analysis, operational expertise, knowledge of their
communities, and feedback to inform the Bureau’s work. Today’s public meeting and — and discussion
is in support of this important responsibility. As a reminder, the views of the CUAC members
are their views. They’re greatly appreciated and welcome, yet they do not represent the
views of the CFPB. So, let’s get started with an introduction
of our CUAC members. The chair is David Seely. He is the president and CEO of Kirtland Federal
Credit Union in Albuquerque, New Mexico. The vice chair is Katey Proefke. She’s the
assistant vice president and compliance officer for Chevron Federal Credit Union in Oakland,
California. Faith Lleva Anderson is senior vice president
and general counsel at American Airlines Federal Credit Union in Fort Worth, Texas.
Kayce Bell is chief development officer at Alabama Credit Union in Tuscaloosa, Alabama.
Daniel Berry is the CEO of Duke University Federal Credit Union in Durham, North Carolina.
Jack Fallis is president and CEO of Global Credit Union in Spokane, Washington.
Patrick Harrigan is chief risk officer and general counsel at Service Credit Union in
Portsmouth, New Hampshire. Ricardo Ledezma is corporate compliance assurance
manager at Credit Human, a federal credit union in San Antonio, Texas.
Sarah Marshall is CEO of North Side Community Federal Credit Union in Chicago, Illinois.
Dayatra Matthews is senior vice president of legal and compliance at the Local Government
Federal Credit Union in Raleigh, North Carolina. Amy Nelson is CEO of Point West Credit Union
in Federal — in Portland, Oregon. Carrie O’Connor is chief lending officer for
Heritage Credit Union in Madison, Wisconsin. Thomas O’Shea is president and CEO of Aspire
Federal Credit Union in Clark, New Jersey. Luis Peralta is chief administrative officer
at Kinecta Federal Credit Union in Manhattan Beach, California.
James Spradlin is president and CEO of Park Community Credit Union in Louisville, Kentucky.
David Tuyo is president and CEO at University Credit Union in Los Angeles, California.
And Raynor Zillgitt is vice president of risk management and general counsel at Lake Trust
Credit Union in Brighton, Michigan. We also have with us Matt Cameron, Senior
Advisor for the Bureau’s Office of Advisory Board and Councils, and David Silberman, the
Consumer Bureau’s acting deputy director and associate director for the Research, Markets,
and Regulations Division. 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 Ohio state representative, Ohio treasurer, and Franklin County treasurer.
Director Cordray? Thank you, Zixta, and welcome to this meeting
of the Credit Union Advisory Council. We created this body about 5 years ago because we wanted
to have a consistent way to hear directly from credit unions about what they’re seeing
and hearing in their communities. We do not, of course, supervise credit unions
that have less than $10 billion in assets, which means we only conduct examinations on
about a handful of the thousands of credit unions around the country. The CUAC, as we
shorthand the term, fills this gap in our day-to-day experience and helps ensure the
channels of communication and the insights they provide can remain open at all times.
So, we’ve found that over the years, the more perspectives we have about our Advisory Council
members’ experience in the consumer financial marketplace, the better we’ll be able to figure
out what, if anything, we should be doing in response. We’ve found great value in the
dialogue we have with our CUAC members, whose perspectives and information influence our
thinking. We talk to them about our work, and they consistently provide essential feedback
that helps us understand how their institutions operate.
Today, before we hear from our subject matter experts in more detail, I want to talk to
you about two important efforts underway at the Consumer Bureau. The first is the work
we’re doing in the checking account space, specifically on overdraft services and the
data point we recently published. The second is the work of our Office of Financial Empowerment,
which seeks to help empower economically vulnerable consumers to make better-informed financial
decisions. As to overdraft, in our fast-moving, modern
economy, it’s increasingly common for consumers to use debit cards the way they used to use
cash. They also write checks and arrange for money to be taken out of their accounts through
an increasing variety of channels that clear and settle in different time frames. This
makes it harder to keep track of their checking account balances from day to day, no matter
how diligent they may be about checking their balances online or by phone. I’m understanding
they’re not always so diligent, uh, but that’s a choice people make.
In particular, consumers living on the edge can find themselves racking up numerous overdraft
charges, and that’s the concern. When every penny counts, people need to understand how
overdraft works and whether they want to take the risk of paying overdraft fees on one-time
debit card transactions and ATM withdrawals. Last month, the Bureau released a study which
finds that the 9% of frequent overdrafters — that is, consumer accounts with 10 or more
overdrafts or non-sufficient funds fees in a given year — pay 79% of all overdraft fees.
The study also finds that frequent overdrafters who’ve opted into debit card and ATM overdraft
typically pay almost $450 more, on average, per year in overdraft fees compared to frequent
overdrafters who have not opted in. So, that’s a big differential just based on the opt-in
decision itself. We also released updated model disclosure
prototypes for consumers who are considering whether to opt in to debit card and ATM overdraft
services. These disclosure prototypes, if adopted, would be intended to help people
make more informed choices as to whether they wish to be subject to debit card and ATM overdraft
fees. An overdraft occurs, of course, when consumers
lack the funds in their account to cover transactions, but the bank or credit union pays it anyway.
This practice gives consumers occasional access to funds and convenience but at a cost. Financial
institutions may charge a fee per transaction for this service, typically now around $34
per transaction, and they require immediate repayment with subsequent deposits.
Consumers who opt in to debit card and ATM overdraft are often at risk of incurring a
rash of fees when they use their debit card or make a withdrawal at an ATM. Despite recent
regulatory and industry changes, consumers with low account balances and little margin
for error continue to pay significant amounts in overdraft fees.
In 2010, new federal regulations began requiring financial institutions to obtain a consumer’s
consent, in advance, before charging overdraft fees on one-time debit card purchases and
ATM withdrawals. Consumers who do not opt in to overdraft would generally have their
debit card purchases and ATM withdrawals declined, with no charge, if the account is short of
funds when they attempt a transaction. This does not apply to checks or ACH bill
payments. Here, the bank or credit union can reject the check or electronic payment and
charge an NSF fee if the account lacks enough money, or, if the financial institution chooses
to cover the transaction, it can cover the payment and charge the consumer an overdraft
fee regardless of whether that consumer’s opted in, but, again, only for transactions
involving checks or online bill payment. Given the potential to rack up hundreds of
dollars in fees on debit card and ATM transactions, choosing whether to opt in to overdraft coverage
is an important decision for many consumers. So, the Consumer Bureau has developed model
disclosure prototypes that, if adopted, would replace the existing model form that financial
institutions use for consumers who are evaluating this choice. We believe these prototype forms,
like our Know Before You Owe disclosures for mortgages and prepaid accounts, could better
inform consumers to make these important financial decisions.
The prototype forms are designed to show more clearly the cost of the fees and when they
can be charged. They describe key elements of the institution’s overdraft policies in
plain language. They explain that the opt-in decision applies only to one-time debit card
and ATM transactions and does not affect overdraft on checks and online bill payments. They’re
also designed to make clear that debit card and ATM overdraft is entirely optional and
consumers do not need to opt in to use their accounts. We developed the prototype forms
through interviews with consumers, and we will now test them more widely.
At the same time, the Consumer Bureau is also considering ways to make it easier and more
efficient for banks and credit unions to provide these improved disclosures to their customers.
For instance, the Know Before You Owe overdraft form, if finalized, would be readily available
on our website. Institutions could plug in their specific information online and then
download the customized form for free. This way, banks and credit unions could use the
form within their existing compliance systems and more easily update disclosures in response
to any overdraft program changes or other innovations.
Whether to opt in to overdraft is an important decision for consumers. They need their bank
or credit union to describe the service fully and accurately, while giving them a reasonable
chance to consent. Very simply, they need to know before they owe.
We’re working to develop improved disclosures that can help make this process easier for
consumers and industry alike, so that consumers can better understand the terms of the deal
and make an informed choice on whether to opt in to debit card and ATM overdraft. In
the meantime, we will continue to study this issue to find the best ways to protect consumers.
The second issue for today is, I want to update you on our latest financial education and
empowerment initiatives. A key part of the financial reform law that created the Consumer
Bureau mandates that we are supposed to find ways to help empower consumers to make better-informed
financial decisions. We’ve been working on helping consumers build financial capability
starting from a young age. We’re also taking steps to better understand financial wellbeing
and support financial capability for everyone. I want to highlight the high-quality tools
the Bureau has made available to consumers to empower them and enable them to make sound
choices when faced with important financial decisions.
For consumers of all ages, the challenges to achieving financial capability can be complex,
varied, and significant. To overcome these hurdles, we must start where good education
always starts, with our children. We all know that when we — what we learn
in school can inform and influence us for the rest of our lives. That may seem obvious
enough to everyone here, yet we must recognize that this country has not done a very good
job of providing financial education in our schools. In our society, financial education
should be as fundamental as the education we all receive in mathematics and the language
arts. Our research has identified a number of important
elements to building financial capability in young people, both in school and outside
the classroom. When parents, caregivers, and early childhood educators support the growth
of what is called executive function at an early age, children are more likely to have
an easier time making plans, focusing, remembering details, and juggling multiple tasks. These
skills can enhance their ability to learn how to manage money and make financial decisions.
As our children get older, encouraging positive financial habits and explaining day-to-day
financial decisions made within the family allows them to have a better concept of how
money works in real life. By the time they’re in high school and looking toward adulthood,
our students can benefit enormously from a standalone course on personal finance.
Here, it’s noteworthy that researchers have looked at the credit outcomes of young adults
who had taken a high-quality personal finance course in high school and compared them to
those of young adults in similar states without such requirements. They found the students
who had taken a high-quality personal finance course had higher credit scores and less likelihood
of credit delinquency later in life. The work we’re doing to help young people
become more financially capable must also be reinforced in adulthood, so to help consumers
of all ages, we’re studying people’s financial habits, the role of money in their lives,
and how they view financial wellbeing. To complement this research, we’ve distributed
resources and engaged in fieldwork, partnering with coaches and practitioners on various
initiatives aimed at improving the financial lives of their clients. A growing consensus
is emerging that the ultimate measure of success for financial literacy efforts should be improvement
in individual financial wellbeing. In 2015, for the first time ever, the Consumer
Bureau provided a conceptual framework to help measure success in financial education
by creating a consumer-driven definition of financial wellbeing. To develop this definition,
we talked with consumers and those who worked directly with consumers to identify what financial
wellbeing means for them. Based on their responses, we came up with four elements of financial
wellbeing. The elements of financial wellbeing are, first,
feeling in control of their day-to-day and month-to-month finances; second, being able
to absorb a financial shock; third, having a sense that they’re on track to meet their
financial goals; and fourth, having the financial freedom to make the personal choices that
allow them to enjoy life. Based on these four elements, we’ve released
a set of 10 questions that operate as a scale to measure financial wellbeing. The scale
is designed to allow practitioners and researchers to accurately and consistently quantify, and
therefore observe, something that is not easily or directly observable, and that something
is the extent to which a person’s financial situation and the financial capability they’ve
developed provide them with financial security and freedom of choice.
This approach is gaining traction. Our scale is now being used by the Pentagon, with their
financial readiness programs, and it’s being looked at and adopted by financial education
professionals in other countries around the world.
To support consumers’ ability to improve their financial wellbeing, the Consumer Bureau’s
providing toolkits and training for practitioners in the field to better serve their economically
vulnerable clients. Our “Your Money, Your Goals” toolkit provides training to social
service providers to address financial issues that can hinder their clients from using their
services successfully. Nationwide, over 17,000 frontline staff have now been trained to use
the toolkit to help hundreds of thousands of consumers help themselves.
For caregivers and others working with older consumers, we’ve created the “Managing Someone
Else’s Money” guides. These plain language guides are designed to help caregivers carry
out their duties and responsibilities in managing someone else’s money, an increasingly common
phenomenon of modern life. So far, over 1.2 million copies of “Managing Someone Else’s
Money” have been distributed across the country. Through efforts such as these and our collaboration
with our CUAC members and other stakeholders, we’re reaching out to consumers wherever we
find them, be it at home, in schools, amidst the community, or in the workplace. Every
part of society — families, schools, government, employers, financial providers, and many others
— have some role to play in boosting people’s financial capability.
The Bureau currently has three companion guides to the “Your Money, Your Goals” toolkit. One
is “Focus on Native Communities,” one is “Focus on Reentry for Justice-Involved Individuals,”
and one is “Focus on People with Disabilities.” During today’s CUAC discussion, we’d like
to review the work of the Office of Financial Empowerment with the Council, receive feedback
on the new disabilities companion guide for “Your Money, Your Goals,” and discuss ways
we can leverage the Council member networks to share this information more broadly around
the country. Through our work together, we can help consumers from all walks of life
attain greater financial wellbeing. We look forward to hearing from you today on these
important issues to further inform our approach. Let me finish by first reminding you of something
you already know, but you should understand, we know, as well. Credit unions provide enormous
value to millions of people around the country and are consistent stewards of consumer interests.
I believe credit unions and the Consumer Bureau have much ground in common. We both want to
see a world where consumers understand their options, weigh their choices carefully, and
make sound decisions. A more educated consumer is a central tenet of our mission. We applaud
your efforts to advance financial education within your members, a mission we share. I
look forward to engaging in these important discussions today. Thank you.
Thank you, Director Cordray and Zixta. Welcome to the second meeting of the 2017 CFPB Credit
Union Advisory Council. My name is David Seely, and I will — and I chair the CFPB’s CUAC.
I’d like to welcome members of the public, as well as new and returning members of the
Advisory Council. I’ve been a part of the Council for a — a
little over 3 years, and I’ve observed and participated in what I believe to be informative
and productive, uh, exercises in sharing how rules and regulations of the CFPB impact credit
unions. Um, we are also allowed to raise emerging issues facing, um, credit unions and share
our input and perspectives on the Bureau’s work, uh, that protect consumers.
During this afternoon’s meeting, we will hear from Council members on two issues that Director
Cordray has already introduced, uh, the Know Before You Owe initiative on overdrafts, as
well as the Bureau’s work around financial empowerment. First, we’ll hear from CFPB staff
Greg — Gregory Evans, who is chief counsel of the Office of Regulations; David Lowe,
economist for the — in the Office of Research; Gary Stein, Deputy Assistant Director, Card
and Payment Markets; and Eva Nagypal, Senior Economist and Acting Chief, Office of Research.
So, with that introduction — and I apologize to you, Eva, uh, if I’ve mispronounced your
name, but, um, uh — — uh, not an everyday common name. But, um,
with that, I’ll turn it over to, um, this group to talk about the overdraft rule.
Thank you very much, and happy to hear I — to hear that I got a promotion, as well. I’m, uh, senior counsel in Office of Regulations,
but I’d be happy to be called chief counsel. Um, so, we’re extremely happy, uh, to be here
today to talk about overdrafts and very excited to hear your feedback and think the best way
to do that on this topic is, uh, Dave Low from our Office of Research and I will provide
a fairly short overview of the information that we released in August, maybe around 15
minutes or so, um, on both the data point on frequent overdrafters and the overdraft
opt-in model form prototypes, and then we’ll reserve the remaining time to have a dialogue
and a discussion, uh, hear your — your reactions and answer your questions there.
So, with that, I’ll turn it over to Dave. Thank you, Greg. This working? There we go.
So, I’m going to begin with our data point on frequent overdrafters. First, let me, uh,
explain what we mean by frequent overdrafters. For the purpose of this research, we’re going
to define a frequent overdrafter as an account holder with more than 10 overdrafts, or NSFs,
in a 12-month period. Why do we focus on frequent overdrafters?
Well, in our data, they make up less than 10% of accounts but generate almost 80% of
overdraft and NSF fee revenue. So, if you want to understand the market for overdrafts,
you need to understand frequent overdrafters. Uh, what I show in this first table for you
here is a breakdown by overdraft NSF group of overdraft NSF fees and the proportion of
accounts. So, you see that, uh, frequent overdrafters, those with more than 10 overdraft and NSFs,
account for less than 10% of accounts but almost 80% of overdraft and NSF fees.
So, let me briefly describe our data and our plan, uh, for the analysis today. So, our
— our data is deidentified checking account data from 2011 and 2012, matched with summary
credit records, which, uh, includes credit scores and credit availability. These are
data from accounts at several large banks included in the 2013 and 2014 Bureau publications.
Our data is representative of over 40 million accounts.
Uh, what are we going to do with this data? Uh, we have three, uh, major goals for today.
First, we’re going to examine frequent overdrafters in detail to understand a little bit more
about who they are, we’re — we’re going to examine distinct subgroups of frequent overdrafters
to examine, uh, differences that may exist among frequent overdrafters, and then we’re
going to compare frequent overdrafters who have opted in to overdraft coverage to those
who have not to see how outcomes differ among those groups.
So, first, let me show you how frequent overdrafters compare to other account holders. Uh, in this
table, we — we show selected median characteristics by overdraft frequency. Um, for example, the
— the — the uppermost and leftmost, uh, entry indicates that among those accounts
that do not overdraft or NSF at all, the median end-of-day balance is $1,585. That’s how to
read that table. What you see from this table is that frequent
overdrafters have low balances, credit scores, and available credit compared to other account
holders. So, for example, the median credit score, uh, of an account holder with between
10 and 20, uh, overdrafts is 585, while the median credit score of an account holder with
no overdrafts is 747. You also see, uh, that there seems to be a
literal relation between monthly deposits and overdraft frequency, but once you drop
inactive accounts, um, which predominately have no overdrafts and have very low deposits,
then you see that those who overdraft most frequently have lower deposits than those
who do not overdraft. So, that’s a brief summary of how frequent overdrafters compare to other
account holders. Now let’s look, very briefly, at, uh, how
frequent overdrafters differ among, um, each other. So, there’s a lot more detail in the
data point. Unfortunately, I don’t have time to get into that today. We implement, um,
a statistical technique called cluster analysis to differentiate frequent overdrafters by
observable characteristics. Uh, what I show you right here, um, is one
result of our analysis. So, on the Y axis, you see monthly deposits of the account holder,
and — of a — of a given account holder, and on the X axis, you see the credit score.
And one finding from our research is that three of the clusters, labeled 1, 2, and 3
on the graph, um, all look fairly similar to each other. There are differences, but
they tend to have low credit scores, low monthly deposits, um, low end-of-day balances, et
cetera. There’s another group, uh, Cluster 4, that
looks a fair bit different from the other frequent overdrafters in that they tend to
have, uh, credit scores and, as a result, more available credit.
And there’s another cluster, uh, Cluster 5, which is about 10% of frequent overdrafters,
that look very different from other frequent overdrafters in that they have high monthly
deposits and, uh, higher end-of-day balances even though their credit scores, um, tend
to range all over the place. Plus, another interesting note, um, is that
Cluster 3 tends to have about twice as many overdrafts as all the other types of clusters,
um, so they, alone, um, generate about 35% of overdraft fee revenue. So, they’re a remarkable
cluster in themselves. Um, but like I said, um, I’ll have to leave more detail, um, for
the data point. Third, today, I want to compare opted-in and
not-opted-in frequent overdrafters, and, again, you have a table, um, that shows median characteristics
of frequent overdrafters, this time by opt-in status. And, for example, you see that the
median, uh, not-opted-in frequent overdrafter has an end-of-day balance of $304, which is
very comparable to the median end-of-day balance of median — uh, sorry, of — of opted-in
frequent overdrafters, which is $312. They also have, uh, pretty comparable monthly deposits;
uh, those of opted-in account holders are slightly higher. Um, very similar, um, count
of one-time debit card transactions and very similar credit scores.
They also have a similar number of overdrafts. Um, here, we’re excluding NSFs, but we’re
including both feed and non-feed overdrafts in this row. You see that opted-in, uh, frequent
overdrafters have about four more overdrafts per year than not-opted-in frequent overdrafters.
Where opted-in and not-opted-in frequent overdrafters differ a great deal is the number of overdrafts
with a fee they have per year. So, in the next row, you see that not-opted-in frequent
overdrafters pay about five overdrafts a year — overdraft fees a year. The — the median
frequent overdrafter who is opted in pays 19 overdrafts — overdraft fees per year.
That’s a — that’s a large difference. We go into a bit more detail, um, in the data
point, um, but again, in the interest of time, I’m going to have to skip over details. And
I’ll be happy to take questions, um — Yeah. Just trying to keep you guys on your
toes, I guess. Um, so what did we find in our data point?
Well, just as a summary, we found that frequent overdrafters have lower account balances and
less access to credit than other account holders. The most frequent overdrafters have very low
account balances and credit scores. Some have higher credit scores, and a few have very
high deposits. Compared to frequent overdrafters who are
opted in, those who — sorry, compared to frequent overdrafters who are not opted in,
those who are opted in look similar along a number of dimensions. They overdraft only
slightly more often. They pay many more overdraft fees.
There’s, obviously, uh, a lot I didn’t have time to get into today, um, and I would very
much, uh, appreciate any comments or questions you might have, so please feel free to reach
out to me. Uh, my email is David dot Low at CFPB dot gov. Thank you.
Thank you, Dave. So, also quite briefly, uh, just wanted to provide an overview of, uh,
what we also released on August 04th, which was, um, the, uh, Know Before You Owe opt-in
overdraft, uh, model form prototypes. Uh, so as a brief reminder, as, uh, I’m sure
you know, uh, there was a — a rule in 2010, known as the Opt-In Rule, that briefly says
that before a financial institution is allowed to charge a consumer, uh, an overdraft fee
on a one-time debit card purchase or an ATM withdrawal, that the consumer must affirmatively
consent or opt in to the overdraft fee, and the rule provides a, sort of, four-step process
as to how you obtain that consumer’s affirmative consent.
Uh, the first, uh, that we’ll focus on today is that you must provide the consumer with
a notice, in writing or electronically, uh, that describes the overdraft service and its
costs. Uh, you also need to provide the consumer with a reasonable opportunity to affirmatively
consent, obtain the consent, and then, also, there is a — a requirement for a confirmation.
So, in particular, we’re going to focus in on the opt-in notice that describes the service.
Uh, so an additional requirement is that the opt-in notice must be, quote, substantially
similar to a model form that was issued by the Board. Uh, we call this the Model Form
A-9, and on the right-hand side here, you can see what, essentially, the A-9 looks like.
This is a version that the CFPB made, uh, for purposes of consumer testing, and we used
a — a fictitious institution, Ficus Bank. So, we sort of filled it out, so that a consumer
would have a realistic look of what it might look like at account opening. So, we have,
for example, a — a $34-, uh, per-transaction overdraft fee, which is around the median.
So, on August 04th, uh, we posted 4 of these model form prototypes to our blog, um, because
we wanted to share, uh, with the public and with you where we were in the testing process,
um, and these model form prototypes, you’ll see, in general, um, contain information that’s
quite similar to what you’d see on the Model Form A-9 today, so very similar information
about fees, uh, and so forth. But you’ll notice that there’s, I hope, uh, very significant
differences in terms of the way that these model form prototypes are designed and organized,
uh, in an effort to improve consumer clarity around this decision.
Uh, this — these, uh, model form prototypes are the results of long-form interviews. We’ve
done one-on-one interviews with consumers, um, more — more than 80 of them from across
the country. So, a few other things to emphasize here is
that our consumer testing is ongoing. It’s by no means done, uh, but we felt that the
prototypes were in a — a state that was, uh — might be helpful to share with the public
and get additional feedback, uh, but we want to emphasize that the Bureau did not issue
a proposal. We’re not offering additional guidance. Um, whatever notice that your credit
union may be using should still be based on the Model Form A-9, and there’s no, sort of,
new interpretation about how those forms should look today. Uh, instead, we’re just sharing,
kind of, where we are in that testing process. Um, if we later propose any kind of modifications
to what a model form should look like, we would, of course, share our complete results
of the testing process, and we would invite comment both on whatever the proposed model
form might be as well as the testing process itself.
So, on our August 04th, uh, blog post, we provided an email address that you can see
there. It’s the CFPB_Overdraft_Forms at CFPB dot gov. Uh, please feel free to share that.
We welcome any kind of feedback you want to send to that address and, of course, we’re
also hoping to hear from you today, uh, about your reactions and thoughts on — on the model
form prototypes. And that might be it. There we go. So, uh,
quite briefly, here are two examples. There’s — there’s four different, uh model form prototypes
that we posted on the blog, but here are, kind of, two that capture the main design
differences. On the left, you’ll see that there’s a format
that uses a, sort of, two-column approach to compare, uh, what we, sort of, think of
as the setting that the consumer is given by default, as well as the choice to opt in,
and on the right is a different format that consumers were asked to respond to that, um,
emphasizes some of the fees for the service at the top of the form and then compares the
differences between the services a little bit lower down.
Uh, you’ll see that there’s two other model form prototypes that I didn’t post here, but
they’re, sort of, variants, uh, within that. So, I think we did pretty well on time, so
at this point, uh, we’d love to open it up to questions, in particular, uh, questions
about either the — the data point on frequent overdrafters as well as the model form prototypes.
Any que — Faith? Uh, yes, um, so the purpose of the — remodeling
the forms, was it to lower the overdraft fees, um, that customers, members, are charged,
or what was the exact purpose of, um, revising the forms?
That’s a great question, and, um, you — we haven’t decided for sure whether to revise
the forms, but these were consumer tests with, uh — that we undertook with specific goals,
and the goals were to ensure that consumers were able to, uh, make the choice for overdraft
services that best conformed with their preferences. Um, we think that this is an area where consumers
are asked to, um, sort of, understand a number of things. The, kind of, basic point is to
understand what the service is that’s being provided and the costs associated with it,
and then, of course, in addition, the consumer also needs to sort of think about, you know,
how they value the service and how they anticipate using their — their account in the future.
So, it’s a — it’s a fairly complex question, and so our primary goal was to see if we could
increase consumer comprehension, such that, you know, when we ask a consumer, you know,
in the abstract, “If this happened to you, and you didn’t have enough money in your account
and you were trying to make a purchase, would you prefer that it be declined, or would you
prefer it go through and be charged this fee?” that whatever they select on this form corresponds
to what they want. So, uh, the — there wasn’t, uh, any sort
of goal around the amount of the fee or, uh, you know, the overdraft opt-in rates or anything
like that. It was really around consumer preference. Um, so that’s what we’re testing for.
You — you mentioned testing. Can — can you, um, give us a little bit more, um, details
about the work that you’re doing and going about in conducting this testing? What does
that look like? Who’s participating? Sure. Um, so as I said, to date, um, we haven’t
released — there will be, at — at some point, a sort of comprehensive report that describes,
uh, the testing process in detail, but the way it’s been done thus far is a sort of two-stage
process. And this — the results you’re seeing today
are, uh, the result of that first stage, which is, we went around the country to consumers
and conducted longer, one-on-one interviews, either a half-hour- or an hour-long interview
where consumers were presented with design, uh, prototypes and asked to make a selection
and then were asked a number of comprehension questions. And that input helps design the
prototypes that you see today. The second phase of the process will be, um,
a much larger sample size of consumers who will see one of these prototypes or, potentially,
a version of the A-9, and there’ll be a, sort of, more quantitative comparison of overall
comprehension in a shorter setting, so, you know, an online — online survey of a much
larger group of participants to compare comprehension. Dan, do — do you still have a question?
You’re making an assumption that these are intentional transactions. I’m going to give
you an example where a consumer will actually go negative and didn’t realize it. Whenever
you go to a gas pump and you swipe a card — everybody uses plastic — a lot of them
hold only a dollar. So, you may have a dollar in your account, but you get 20 bucks’ worth
of gas. So, what will happen is, the member will intentionally go negative — or, excuse
me, unintentionally go negative, because the hold was only for a dollar and they didn’t
know. Yeah, that’s helpful. Thank you. We’re — we’re
aware of these types of situations, and — and, um, you know, we’re — we’re considering,
you know, there’s — there’s a lot — as we sort of hinted, uh, in terms of the complexity
of the payment system, there’s a lot of different types of transactions that hit consumers’
accounts. There are sometimes delays in between authorization and settlement, so, you know,
we’re aware that there’s a lot of complexity in this space, and we’re trying to help consumers
navigate and best understand, you know, the different transactions that are hitting their
accounts. Uh, Sarah?
But another way that we’re trying to navigate that a little bit is, uh — and Gary could
speak to this — is, we’ve been very much involved with the Federal Reserve efforts
to move toward a faster payment system in this country, a real-time payment system.
Uh, won’t quite be there yet, still, although that is in place in some places around the
world. To the extent transactions are registered
more immediately and instantaneously, there will be less confusion for consumers, less
ground for not knowing whether that one, uh, came before that one or just — just what.
So, uh, that — that’s part of a broader strategy on this.
Sarah? I had a comment. I’m always in favor of clear
disclosures, and I think it’s important to make those available to consumers. I did want
to comment, and I commented in our earlier meeting, that we’ve chosen not to offer any
opt-in feature to any of our members for overdraft, and that’s mostly because of the demographic
that we serve. We have not figured out a way that — even if a member were to opt-in, that
it would be a truly affordable option for them.
What we actually see is that people are using this as a cash management tool and are more
likely to use it that way and that a disclosure wouldn’t necessarily be effective. So, we’re
not doing it because we feel like the $34 fee, although it could be profitable and is
a very profitable product for members who bring their accounts back into line, uh, would
not be the — to the advantage of our members. So, until we can figure out a — a fairer
fee structure or something that really takes into account the way people use the products,
uh, we don’t feel like we’re able to offer it.
Amy? A quick question regarding, uh, the testing
group. Does this also include English-as-second-language members, community members?
So, the testing has been conducted in English. Uh, we’re certainly aware that there are consumers
who, uh, may not use that as their primary language.
You’ll see on the form in the — the — the section — it’s a little hard to read on this
slide, but, uh, in terms of the question mark section that has a link, uh, one of the — the
things at the very end there is, we were testing to see if consumers understood that if they
went to that consumer finance, uh, address, that there would be options for them for other
languages. So, we tested that, and there was good comprehension around, you know, understanding
that if they went to that website, that native speakers could find resources in that language.
Thank you. Primary purpose with this slide was to show
us the difficulties of dealing with the fine print. I — I — I can assure you, if — if you saw
one of these forms on an 8-1/2 by 11 sheet of paper, it’s much — there’s a lot more
white space than, uh — than you’ll see on the Model Form A-9, for sure, and, uh, we
— we’ve used a lot of the resources we have here in T&I around our design — folks to
help us come up with something that’s — that’s a little bit more readable and better organized.
Katey? Thank you. First of all, I think the form
is a huge improvement over the A-9. I think it’s much more attractive, easier to read,
easier to understand. One of the questions that I had is, we, whenever
possible, use a model form, because we want the benefit of a Safe Harbor situation. But
one of the things we’ve seen in California is that there are some pending lawsuits with,
um, institutions that are using this form because there’s not enough information on
here to, um, explain the difference between actual balance and available balance.
And so, a lot of institutions don’t understand — don’t know — I — I’m unclear as to whether
I can add some additional language at the bottom of this that would clear that up and
still have the benefit of Safe Harbor or, you — you know — or maybe you might want
to contemplate adding that to the, um — to your new forms.
Thank you. That — that’s very helpful. And the, uh — I mean, the — the substantial
similarity requirement, um, you know, it’s obviously a case-by-case basis, depending
on your specific institution and what services it offers, but that — that’s something that
we’ll think about. Um, you know, part of the trade-offs here,
too, that we confronted in this form is — and I think you’ll see that we’ve tried to sort
of keep some white space, keep away from fine print, but the — the tradeoff is also, it’s
hard to convey lots of information if you just want to sort of keep it to, you know,
the two or three big takeaways. So, there’s — there’s always a tradeoff there, and that’s
something we’ll — we’ll keep thinking about. Yeah, even for people who, uh, know an area
extremely well, this is a challenging task to try to take these things, boil them down
into clear and understandable terms, and I think it’s something that, at least from my
perspective, I think people at the Bureau have done very well over — over the years.
And I remember one, uh, different setting. Uh, we were over for a meeting at the White
House, and it was on a — a Know Before You Owe version of paying for college forms that
we developed, and there were a number of university presidents sitting there. We were waiting
for the meeting to begin. They all start looking at this form; you know, it’s a — it’s a very
short form. And of course, they’re college presidents; they all have thoughts about it.
You know, well, maybe it ought to say this, or maybe it ought to say that.
You just sit there and let them go on for about 2 minutes, and — and — and then, suddenly,
they all begin to realize how hard this job really is, because they all have different
directions they want to go, but it all has to, ultimately, fit in there, be intelligible,
and be clear and — and keep the key points, uh, highlighted as key points. It’s — it’s
really good work, I think, our people do in all these markets, including, now, this one.
Katey, let me, if I can, just, uh, a plug, I guess, if you will. As Greg said, even if
— even if we decide to move forward with a rulemaking, it will be a number of years
before we’ll be able to finalize a rulemaking and new forms would take effect.
We do have the authority, under our act, to, uh, entertain pilots of alternative disclosures,
and if somebody wants to come to us and say, we have a disclosure that we think will better
inform consumers than what’s in A-9 or any other model form, we’re very much open for
business and would love to be — have opportunities to try and learn and test other things and
see if there are ways improving that’ll — that’ll inform ultimate rulemaking but will make life
better for consumers in the meantime. So, encourage folks to think about whether there’re,
uh, disclosures that they think can be improved on and they’d like to try and try it without
waiting for a change in the rule. The sad thing is, no one has ever done that
yet, uh, so we’re still hopeful. I, um — I think we’re trying to address the
wrong problem in — in this approach. Uh, looking at your data, uh, 10% of, uh, all
the users represent almost 80% of all the actual overdrafts.
So, I don’t think it’s a disclosure issue. It’s more of a either behavioral issue, uh
— There’s more underlying issues, uh, on why they’re so frequent users, uh, of that
type of, uh, service, and rather than providing them with clearer disclosures based on, uh,
the average deposit that you show — Uh, they obviously know these — all these fees that
are happening in their bank accounts, uh, because, well, they are disclosed in their
— in their bank statements or — or — or their account statements.
So, evidently, they are aware that that’s happening, but there’s something that is triggering
the need for that — for that service. So, what are you planning on doing to address,
uh, that and hopefully identify solutions for that 10% that would result the 80% of
the — of the cases? That’s — that — that’s a great question,
and, you know, I think something that we’ve been trying to ascertain is, it’s — it’s
very difficult, uh, from even — you know, we have amazing data, this account-level data
that, uh, has really provided a lot of insight into consumer behavior. It doesn’t tell us
anything about, uh, what the consumer wanted or what the consumer preferred, um, whether
these overdrafts were intentional, whether the consumer had alternatives, um, and so
that’s something that we’re still, sort of, looking for additional insight about.
So, I think there’s, uh, some overlap between overdraft users and payday users. Uh, CFSI
did an analysis, uh, about some of the rationale behind, uh, the users of payday loans, uh,
so maybe that’s an approach that you could, uh, follow, uh, so that once those different
profiles are identified, then specific solutions could be, uh, uh, created.
So, yes, uh, thank you very much, uh, for your comment. Uh, I, um — certainly, we’ve
— we’ve looked some at the — the overdraft, uh, payday relationship and — and, uh, uh,
that part, but I wanted to get back to your earlier point, about whether this makes a
difference for frequent overdrafters. That’s exactly what the last — the third
part of our — our data point, uh, speaks to, is that, you know, if you look at these
frequent overdrafters, just the frequent overdrafters who make up those 10%, whether you’re opted
in or not opted in makes a very big, uh, difference in — in — in terms of the fees that you’re
charged. So, you’re right, there’s a lot more, you
know, going on in their lives and where, you know, these income shocks are coming from
and what are the opportunities they have, but we feel that this — this is an important
lever in — in making sure that they understand that that choice is — is really critical.
Yeah, I know this. It — it does make a difference in the fees that they are charged, but it
doesn’t make a difference in the actual overdrafts that they incur in, so.
Well, the — the good news is, I think your question is outstanding, because you set up
the second part of this meeting very well, when our — — financial empowerment folks come in to
talk about how we can help consumers take greater control of their lives.
I think, as Eva said, we’re — uh, and — and the director and Greg and everybody else have
alluded to. I mean, checking accounts have become so, um, uh — so, um, powerful in their
ability to enable consumers to transact through multiple different methods, but it does make
account management more challenging, um, and — and so that’s a — that’s a tough tradeoff
and one that I don’t think can be resolved in the short term until all the faster payments,
um, overtake all the legacy payment systems through one approach.
But as Eva said, I think we have to kind of strip away at this as best we can in a way
that enables consumers to, um, you know, gain control and — and — and help stabilize the
market in the process. But I — I think our next speakers will also be able to talk to
some of your more underlying concerns. If I can just connect your point with Dan’s
point, with Eva’s point — In the hypothetical you posed, of the consumer who went to the
gas pump, didn’t necessarily intend to overdraft, swiped, had a $1 authorization, if that person
was opted in, that person would have been charged $34, on average. If that person was
not opted in, that person would not have been charged anything. So, these are not disconnected
Not to belabor, uh, Luis’s point, but I think it’s a good one, um, because we’re a prime
example of a government where, um, in contrast to Sarah’s credit union, um, all overdraft,
for us, is opt in, all right? So, you have to opt in to everything. Yet, we still have
repeat overdraft, quote/unquote, offenders. And so, that goes back to the question, is
it a matter of disclosure, or is it just, again, um, bad cash management, if you will,
and need? Um, so I do think, again, he makes an excellent point in that regard.
I would love — I mean, if you can provide us, um, some, uh, model forms that make it
clearer or more simpler, then I — I would certainly welcome that and — and, um, uh,
put ourselves down as the — as the — the guinea pig, if you will, since we have opt
in for everything, to see if there’s any change in our membership, um, uh, decisions. Quite
honestly, I doubt that we would see that. Patrick?
Just briefly, uh, I also agree with, uh, others here that the new model forms are much clearer,
and that’s great, and to be able to use them, to swap out the old forms, swap in the new,
is not that big a deal. I am skeptical, as others have mentioned, about whether or not
the — the use of these will change the consumer behavior, uh, vis-a-vis the overdraft protection.
The other complicating factor that I wonder if you’re — you’re taking account of in your
testing or in considering this issue is, when these forms are given, it’s usually at account
opening, and you’re going through — which — So, you have an account opening form. You’ll
have all the other disclosures — Reg E, privacy, Reg CC. I mean, it’s just a — it’s a disclosure
fatigue issue. Um, often, these people, when they’re opening the accounts, are also making
a — doing a car loan, so you have all those going on, you know, and they have to make
the credit life/credit disability decision. There’s a — there are a lot of things going
on here. This is not, um, given to a member or a customer in a vacuum. Uh, there’s a lot
going on. I don’t know if you’re taking into account that factor.
Thank you, that’s — that’s very useful. Faith?
I just wanted to add, um, so, um, to what Patrick was just mentioning. What we do is,
once they opt in to the, um — the ATM and the debit card, we send them a separate letter
just to confirm that that’s what they wanted. But also, just like what Sarah had mentioned,
if, um, they don’t have good credit, or they have no credit, we offer, um — we offer a
debit card, and they cannot get, you know, any overdraft, because it’s to help them,
you know, build credit, so that’s what we do.
But I also just wanted to give you some technical pointers on your form, because I think it’s
much easier to read, especially the one with the three columns on the left-hand side, versus
the A-9 Form. Uh, but I think it’s a little bit misleading, where you say ATM overdraft
fee, um, and debit card you say no fee, because it’s really no fee, transaction denied, and
that’s really what, um, our members look for. Is the transaction going to go through, um,
or not? And then, it’s also, um, a little bit confusing
because, you know, as you just mentioned, um, for, um, checks and bill payment, they
don’t have to opt in, but in one of the forms, you have to say, you know, check to keep as-is,
but really, you know, that’s what we offer if they’re — if they qualify. And so, it’s
really the opt in that’s most important. Thank you, that — that’s extremely helpful.
I didn’t know if you had any reaction, specifically. It’s not one of the examples we put here,
but there’s, uh, a prototype that has an example transaction on the other side. I don’t know
if you thought that that was helpful — Uh, yes, that —
— with answering that. — that — that was helpful. Um, I know — Uh,
yes, I thought that was helpful, also, because they could better understand. Um, I think
if you also said, you know, no fee, transaction denied, so that they can truly see, well,
yes, while my balance is still only $10, I wasn’t able to pay those other transactions
that I wanted. Thanks. Sarah?
Uh, so if I’m incorrect, I’d be curious to — to know what your thoughts are, but it
seems to me like the underlying assumption is that these overdraft fees is to frequent
overdrafters for a combination of different reasons, maybe it’s credit access, maybe it’s
affordability. Um, and if that is the underlying assumption, it seems like, perhaps, the disclosure
is the wrong conclusion to — to addressing the issue. So, I’m — I’m curious as to whether
that’s the assumption, uh, as to why the Bureau’s looking at this. Um, no, I — I don’t — I don’t think that’s
the case. I think — and, um — and I think, uh, Luis kind of raised a point, and I was
thinking about this, too, is that, um, I think there’s a lot of reasons consumers overdraft,
and we think that, uh, in some cases, you know, it might be a critical moment that they
are doing it consciously. In other moments, they probably have some idea that they might
be making a payment that’s going to settle and post on or near when their direct deposit
or paycheck hits, but they’re not entirely sure, and they kind of take a risk, with some,
maybe, incomplete understanding of the odds. Um, in other cases, they may be entirely surprised.
So, I — I think — you know, I — I think we expect, from the feedback that we’ve received
from many outside the Bureau and our own research, that there’s, um — you know, uh, there’s
instances when that courtesy helps consumers very much, and as the evidence shows, there’s
people that are overdrafting a lot that have poor credit, and they may be benefitting from
that, uh, some times, but there’s also instances when if they had the total foresight to know
what was going to happen with that transaction, they probably wouldn’t have executed that
transaction. And these may be one and the same consumers.
You know, sometimes they want the transaction to go through, and sometimes they don’t, um,
and as Eva pointed out, you know, we try to think about, well, what are some of the things
that might obscure some of that control. Um, some of them are inherent in the way that
deposit systems work, and payments, and some of them may be in the way that the choices
are presented to them. And so, again, uh, I don’t think we see this as a, you know — a
— a cure-all for all that ails folks in terms of overdraft, but it’s one way to help consumers
be in a little more control. Carrie?
Um, I apologize in advance if I maybe missed this part, but, um, I’m — I’m still confused
about why there’s such a big gap between the number of overdrafts and the number that they’re
being feed for, whether they’re opted in or not opted in. I mean, is — is that saying
that financial institutions are more often waiving fees for people who are not opted
in, or, um, I guess what is — what is driving that?
So, that’s an excellent question. Thank you. Um, we do not have the data to say definitively,
uh, why that gap exists. We think there’s a strong argument to be made that is supported
by our data that a phenomenon that we call, uh, APSN — authorize positive, settle negative
— is responsible for a large part of the difference.
Um, so, for example, if a consumer has, uh, $50 in her checking account and swipes her
debit card for a $20 transaction, um, that transaction will be approved, um, and then,
suppose a $50 check clears her account, brings it negative, she’ll be charged an overdraft
fee on her check, no matter what. Um, but then, the next day, the, uh, debit card transaction
posts to her negative balance. If she’s opted in, she can be charged a fee. If she’s not
opted in, she can’t be charged a fee. Um, so in the data point, we examine this
in a bit more detail by looking at overdraft fees on debit cards, and we see that there
is a very stark distinction between opted-in and — and not-opted-in frequent overdrafters.
So, opted-in frequent overdrafters pay about 12 overdraft fees on debit cards per year,
um, and have 1 debit card transaction without a fee per year, um, compared to not-opted-in
frequent overdrafters, who have, uh, obviously, zero overdraft fees and debit card transactions
per year and 12 debit card transactions without a fee — debit card overdrafts without a fee
per year. So, that’s a — a — a — a big part of the story.
So, that does sound like it’s more about the payment system and maybe, even, the banking
or credit union systems than it is about, um, the consumer, to some degree, and —
Yeah, and that, obviously, depends on — on, um, a transaction posting order, all sorts
of bank policies, absolutely, which we, uh, suspect consumers don’t necessarily understand
when they’re choosing whether to opt in or not.
Tom? Uh, one comment and one question. Uh, one
of the things that we do — We — we work with employer groups. One of the things that
we do for our members is, um, we post their payroll when we receive the file, not necessarily
when payday is. So, we have one employer that the payday is
Tuesday, but we receive the file every Thursday, prior to payday. So, we post it Thursday night,
so they have their money available for the weekend, and we help minimize it, uh, so when
they’re shopping food and stuff over the weekend, they’ve — they’ve got the — the money available.
Um, so my question — Do you have — Have you looked at transaction-level data to understand
the types of items that are being overdrawn? So, if it’s, for example, a rent check, a
large — large-dollar item, uh, and this became their lowest-cost alternative — because they
could go to a payday lender or another, uh, type of lender, uh, for some money that might
be higher cost. So — so, from a money-management standpoint
and from a, um, ease of use, as well, this may have been their best value going forward.
And is there any way to incorporate that type of comparison or — or education in — in
a form like this? Thank you, uh, that’s an excellent idea. Um,
that would be very interesting to do. Uh, as Greg mentioned, our data is very rich
in some respects, and in some — some respects, we wish it were richer, um, and one of those
areas is that we do not, um, see why consumers are spending their money or where it’s going.
Um, all we observe are transaction amount and transaction type. So, we might see a check
clearing your account for a large amount of money at the end of the month. Um, we would
not know it’s for rent. Yeah, part — part of the reason we couldn’t
get that — To get that level of detail would require getting personally identifiable information.
Uh, I — I think we should note, though, that we do have the ability, as — as we’ve kind
of implied, uh, to see overdrafts by transaction channel, and we can see them by transaction
size. And so, you know, uh, the debit card transactions, I think the median value of
the transaction was, what, 40? FETwenty-five dollars.
Twenty-five dollars, right. So, uh, you — you — you can infer some of that from that.
We only have, uh, time for one more question, um, so I — I don’t think — Jim, you haven’t
asked your question yet, so, uh, let’s defer to Jim.
Uh, it — it’s more of a comment. We — we’ve discussed overdraft all 3 years that I’ve
been on the committee, I think, and the thing that always concerns me when we have this
discussion is that, are we setting up a situation where we’re really going to take personal
responsibility out of the equation, to where we’re going to give the consumer the right
to say, there’s so much going on in the payment systems, there’s so much going on, I can’t
be held responsible for the balance in my checking account. I’m just going to spend.
Make sure you pay everything, and don’t fee me on it; there’s no consequences for my actions.
So, that’s just always a caution I have and a concern I have when we start talking about
this and, um, just something I like to keep in mind as we’re doing it.
Okay. Thank you. Um, thank you, Eva, Gary, Greg, and David. Uh, this was very informative.
Uh, hopefully, within the next decade, we’ll have this all figured out and, uh — — or the — the payment systems will just
get ahead of this and, uh, uh, everything will be real-time posted. So, thank you, again.
We’ve actually made a commitment to get this resolved while you’re still chair, David. Okay, we’ll bring up the next, uh, group.
Well, you — you — as — So, now we will move to, um, financial empowerment initiatives,
and, uh, for this, um, discussion — the second discussion this afternoon, we’ll hear from
Bureau staff about the important work that you’re doing to empower consumers to take
more control over their economic lives. We have Daniel Dodd-Ramirez and Olivia, uh,
Calderon here to, uh — to speak with us. Uh, let’s see, respectively, they are the
assistant director and chief strategist for special populations — You can get that all
on a business card, I assume, and, um — in the, uh, Bureau’s Office of Financial Empowerment.
Now, that’s — whose title is that? Is that —
I’m — I’m the assistant director. Okay, you’re assistant director.
I’m the assistant director for the Office of Financial Empowerment.
Okay, and you’re the, uh — Olivia —
Special populations. Okay. Oh, great. Oh, they’re — they’re run
together, so I’ll — I’ll criticize Matt for missing a, uh — — uh, a comma. So, um, the, uh — the floor
is yours, Daniel and Olivia. Great. Thank you. Not very often you have
an opportunity to criticize Matt, either — — so. Um, thank you very much for — for
taking the time to — to listen to what we’re doing in the Office of Financial Empowerment.
Um, we are one of, um, four special population offices here at the Bureau.
I understand that a couple of committees, um, heard from the Office of Service Members
Affairs and the Office of Older Americans this morning. Um, and so, with the Office
of Students, that kind of rounds us out as far as the four special population offices
that focus, um — that — that — that serve under the Consumer Education and Engagement
Division here at CFPB. Our office, in particular, focuses on low-income and economically vulnerable
consumers who — we define people that are at the poverty line and at twice the poverty
line, so a pretty big, um, group of — of Americans that — that fit that.
Um, I’m really, um, again, excited to be here, talk a little bit about some of the work we’re
doing. We’re going to really focus on one program in particular, which is “Your Money,
Your Goals,” um, and I just wanted to mention, we’ve had very strong partnerships with, um,
credit unions around the country as we’ve rolled out “Your Money, Your Goals.”
Um, the — the — the Credit Union, um, Network of Montana, um, really helped us, at the very
initial stages, in — in — in piloting “Your Money, Your Goals,” um, and, um, Director
Cordray spoke, um, when we launched “Your Money, Your Goals” in Minnesota, where we
had, uh, the Credit Union Network of — of — of Minnesota, which was main — our main
partner in launching “Your Money, Your Goals.” Um, we’ve also had a lot of participation,
even, um, in Mississippi, with Hope Credit Union, um, in Mississippi. Um, so, we — and
I know that I’m missing quite a few, um, that we’ve had a lot of participation from the
very beginning, um, with, with this particular product.
I want to take a moment and, um, talk a little bit about our office before we jump into “Your
Money, Your Goals,” and, um, Olivia Calderon is going to talk a little bit about a new
product that we’ve just put out, uh, and a companion guide for people with disabilities
that Director Cordray already referred to, um, earlier in the opening remarks.
I think they all have it. Okay, great. Thank you. Yeah, you should have
it in front of you. Um, we — we have, um, our own vision, um,
within our office, um, that I’ve talked a little bit about our focus, um, and you should
have a — a — there’s a — a — there’s — there’s a list of our values. Uh, we are really looking
at the marketplace, but then we are really thinking about how to provide tools, um, you
know, that can help consumers to better manage their finances, something that’s already been
spoken about by — by members, uh, of this — of — of this board. Um, and — and we
— we — we understand that that’s really important.
Um, on the other hand, we’ve also really worked looking at products, and we’ve done — uh,
we’ve just finished a random control trial evaluation of a, uh, credit-builder loan,
uh, with the St. Louis Credit Union, uh, that really showed some very, um, exciting results.
Uh, I think it’s a product that I know that most of you all, um, get behind and — and
support, and it’s been offered at credit unions and community banks for quite a long time,
and we’re hoping, um, through the results, um, that we’ve just finished with the RCT
evaluation that we did, that that will help, um, to create more products and help to go
to scale with — you know, with things like this that help low-income and economically
vulnerable, um, consumers that are credit invisible to build credit records.
Um, so we are looking, um, in — in those three areas, uh, when we look at our work.
And here’s, kind of, a diagram, um, of — of, uh — with — if you think about our Office
of Financial Education that’s doing most of the work around what’s effective within financial
education, and they’ve defined financial wellbeing in a — and — and have got — got a growing,
um, whole body of research for this that supports that, um, then our office really is thinking
about, well, how are we helping to build capacity with nonprofits, with social service agencies,
uh, with different sectors that can help us to reach scale, um, to — to reach all the
people that are low income, um, and economically vulnerable to really look at the biggest impact
with products, um, and also really identify policy issues, um, that — that are out there
that might be affecting, um, low-income families, um, and raise that attention, um, of — of
those sorts of things to the Bureau. Um, and as we are out there with, um, you
know, programs like “Your Money, Your Goals,” um, we are, um — we’re — we’re — well,
we’re — we’re hearing a lot more, um, on the policy side, um, and people are — are
letting us know when they’re — when they see areas where low-income families have been
unfairly targeted by debt collectors or — or — or whatever, um, and — and that helps,
hopefully, to inform the work that we’re doing at the Bureau.
Um, so, uh, I’ve talked a little bit, uh, already about these issues. Here are some
when I just keep going. Um, “Your Money, Your Goals” is a, um — a toolkit, and it’s very
different from, uh, a curriculum, in that it was really designed as something that can
help people to — you know, that are already helping people, um, in different ways.
So, maybe you have a, um — somebody that’s helping to certify or recertify for public
benefits, somebody that — that’s working at a, um, job center that’s helping somebody
to get a job, um, someone that’s helping someone else to get housing, um, so they’re already
interacting with consumers in — in — in the many ways that — that social service
agencies do. Uh, we wanted to equip them with, uh, materials, um, to really look at the intersection
with finances. Um, and so the toolkit has really been designed
and was really tested in that kind of way, to really help people to, um, look at the
unique challenges that they’re seeing that very moment. So, maybe somebody can’t get
a job because their credit report. Uh, we know employers are looking more and more at
credit scores. Um, and so they remember, after going through a training of “Your Money, Your
Goals,” that they — that they’ve actually got a toolkit, and they can go back in and
pull out that section to help the person improve their credit, um, make them aware of — of
products and also help them to clean up their credit.
Um, and so it’s really very different from a curriculum in that it’s, you know, A to
Z. It’s really meant to be — you know, you come in, you pull what you need out, and you
use it at that moment, make copies and give it to the client, and hopefully, the client
can take further steps. Uh, social workers, frontline workers, are really also encouraged
to take time, um, to develop a referral system, um, for — to the experts, to people that
have deeper knowledge, um, the credit counselors, the financial coaches that are out there,
the counselor — the HUD counselors that are out there, you know, for the deeper work.
Um, and — and we’ve seen that, um, over and over again. In fact, at the very beginning,
we had some credit counseling agencies that are like, “Well, wait a minute, you’re kind
of getting into our turf with this,” um, and we said, “Well, actually, you’re going to
see, uh, you know, hopefully, you know, a stream — more — more people coming through
your doors as a result of this,” because, um, we’re very clear in the training, uh,
with “Your Money, Your Goals,” um, that, you know, you shouldn’t be teaching outside of
your — out of — out of — out of your expertise and to develop that referral system. And we’ve
heard that, um, repeatedly, around the country. Um, we’ve — we’ve, um, also developed companion
guides, and we’re going to talk about one of those companion guides, um, and — and
Olivia will spend some time talking about that.
And another thing that I wanted to point out, um, is, um, a — a — a brand-new, um — a
booklet, um, that some of you have probably seen. I’ve got some here, and I’ve got another
bundle — another, uh — another stack that are out in the front — in the front table
that you can get. Um, but this was meant to accompany, um, “Your Money, Your Goals.”
So, “Your Money, Your Goals” is a pretty big toolkit, um, and it’s about 400 pages, and,
um, so it’s pretty — you know, it’s — it’s pretty — it’s pretty — it’s pretty big.
And even though somebody goes through a training — we all go to trainings, and the material
sometimes can stay on the — on the, um — on the bookcase afterwards, and you forget to
— you know, to go back into it. So, this was meant to be and it was really tested to
be kind of a bridge between the bookshelf and the desk and to be a reminder for the
frontline workers as they’re working with clients, um, on, you know, different issues.
And, you know, you open it up, and on the inside is an 8-1/2 by 11 black and white.
You can make a copy, give it to the client, the client can use this — this particular
one here is an income tracker — um, and, um — and it’s really, um, set up in that
kind of way. This other one here is a spending tracker. And, again, you know, what we’ve
seen — Actually put these out, um, um, in January, and, already, over 200,000 copies
have been ordered from around the country of this particular tool that accompanies “Your
Money, Your Goals.” Um, and what we’ve really been excited about
since we’ve been talking to social workers — and not just social workers, but, you know,
case workers, um, different types of — of folks that are interacting with the public
— is that it brings them back into the toolkit. So, they remember, oh, yeah, I went through
that training. There’s a lot more in there if I want to go deeper. Um, and then, again,
I can refer folks to, um, credit counselors to even do deeper work, uh, if the need be.
Um, since we started with “Your Money, Your Goals” over the last 4 years, we’ve trained,
um, over 20,000 frontline workers that have reached an estimated, um, 700,000 consumers.
This, um, uh, slide actually just lays out what I was just talking about, so here we
are, uh, the CFPB and, um, somebody just pointed out that these buildings are a little fancy,
um, for social service agencies, um, so we might have to rethink that.
Um, um, and those social service staff have, um, frontline staff volunteers, um, that are
interacting with clients every day. They have relationships, they have access, they have
their trust, and so we’re — we’re thinking about how to get financial education, you
know, out into the market to, uh — to try to help as many people as possible. Um, this
is really, uh, our — our — our strategy of scale, um, to — to reach them.
Um, I’m going to take a — uh, uh, I’m going to go ahead and pause there and have Olivia
come in and talk about, um, the disability guide, which is the — the brand-new guide
that we just released yesterday. Thank you, Daniel. Good afternoon, everyone.
Again, my name is Olivia Calderon, and I am so happy to be here with you today to share
some of the promising ways that we’ve been working to financially empower people with
disabilities and their families. And, of course, we want to see everyone participate
fully in the mainstream financial marketplace, but when it comes to families with disabilities,
uh, we know that they disproportionately live in poverty and that people with disabilities
are twice as likely to use non-bank financial products and services, um, and that four to
five adults with disabilities don’t have, um, an emergency fund to turn to in a time
of crisis. Now, these challenges, for us, have created
an opportunity for us to identify and for us to design solutions to spur greater financial
inclusion for people with disabilities. We began this journey a few years ago, and we
really, um, were inspired by, uh, and guided by the advice of the disability community
that proudly affirms, nothing about us without us.
And so, we started by bringing together practitioners and academics and, uh — and advocates with
disabilities, some without disabilities, all of whom serve the disability community, to
share their perspective with us, to look at “Your Money, Your Goals” and to tell us, uh,
what’s missing, what should we be including, and how can we create tools that are really
tailored to meet the needs of people with disabilities. And so, we joined forces with
the FDIC and, uh, had a convening last fall and in the spring.
And you know, what we learned from this convening is that financial empowerment is more than
just providing information. It’s really developing and designing tools, like I said, that are
tailored to meet the special needs of — of individuals. And so, we, um — we took all
of their feedback and, uh — and we came together and rolled up our sleeves and started working,
uh, to develop a product, um, that would complement “Your Money, Your Goals,” and, uh, yesterday,
we officially publicly released it, and you’re the first ones to have it there before you.
Um, and so, it is this tool, um, that we’ve created, and again, like Daniel said, um,
it complements “Your Money, Your Goals.” It’s designed for folks who are frontline staff
volunteers — um, it could be a parent with a disability, anyone — to really pick up
and be able to use it and use it easily. And so, this companion guide, um, the way
we’ve designed it, um, it’s, uh — it helps for folks to be able to — to see that, um,
it’s not easy to start the money conversation. You don’t even know where to begin, and it’s
a very sensitive issue. So, we’ve developed a questionnaire, and that’s how this disability
companion guide kicks off, really, um, questions that you could think about, you know, asking,
uh, so that someone opens up. Um, and the questions come along with responses, suggested
responses that, you know, um, help you know where to turn to.
Because this isn’t a companion guide. They’re tools. Um, so if an issue of credit comes
up or savings or debt or financial abuse, fraud, and exploitation, you know exactly
where to turn to in this guide and where to go to in the toolkit for additional resources.
Now, the design of this, I’m really excited about is that we’ve actually developed 11
new tools, and these are tools on everything from how to help someone start saving. You
know, for a long time, people with disabilities couldn’t save because of asset caps that impact
their SSI. But now, for the first time ever, they could save in something like an Achieving
a Better Life Experience account, an ABLE account that allows you save up to $100,000
without fear of losing your public benefits. And there’s a tool there on how to do just
that. Or perhaps it’s setting a goal for assistive
devices. It’s expensive to go out there and get assistive technology, and so setting up
that goal and figuring out ways to finance it — There’s another tool there.
Or maybe it’s demystifying that if you work, that you might lose your public benefit, your
SSI. And so, there’s an SSI estimator that shows you that work does, in fact, pay and
that you can make more and save more if you go out and work.
Um, and then, again, like I mentioned, there’s, um, the tool there on how to, uh — I’m trying
to click here — uh, how to identify — the last tool, identify financial fraud and abuse,
um, and help someone, because oftentimes, someone could be, you know, afraid or ashamed
to go out there and report it themselves. Um, so, these are all of the new tools. I
can go into detail. I mean, I’d love to go into detail on all of the new 11 tools. I
think what I’m really excited about, as well, is that, you know, all of these tools, um,
now live on our website and, um, that they were designed to be fully dynamic and fully
accessible. And what that means is that anyone, regardless of their ability — if they’re
using assistive technology or a screen reader, uh, can access our tools and use them, uh,
and, uh — and of course, um, it’s the first time that we now have these fully 508-compliant
and dynamic accessible tools. Uh, it has been an extraordinary collaborative
experience across the Bureau here to develop this new, uh, guide and tools, uh, and we’re
always looking for ways to, um, get feedback, uh, build on the guide, and improve on these
tools. So, I’m really excited to be here and, uh, get your questions, and looking forward
to the conversation. Thank you. Are we ready for questions?
Sure. Okay, who wants to ask the first question?
Uh, Luis? Well, first of all, I would like to congratulate
you for, uh, putting this — this together. I think it’s — it’s — it’s a great tool,
uh, and a great resource for people, uh, to educate themselves about, uh, these type of,
uh, financial, uh, tools and — and — and resources that are available.
My question for you is, um, were you able to test these, uh, with some of the users,
or potential users, in terms of how easy to understand this is and if the format is the
right format for them to — to consume? Thank you so much for the question. Yes, absolutely.
Uh, in May of this year, we met at Gallaudet University. We brought, um, together, uh,
30 organizations from across the country. These were nonprofits, um, uh, centers for
independent living. They were American job centers. Um, they were folks from different
universities that are working with students with disabilities. Um, they were leaders of
coalitions at the state level. Again, um, the majority have disabilities themselves,
others don’t, but they all serve the disability community.
And we were able to take our tools, um, and share our tools, and, uh — and really get
their feedback, because we wanted to have that user experience to make sure that, uh,
one, we were not missing anything, but it made sense, uh, and that we could build and
— and — and improve on that. We did that, together with the FDIC, and we actually took
their feedback, uh, to finalize the tools and the layout for this.
As a matter of fact, it also resulted in an additional tool that we created, which is,
um, the budget tool that you see there. You’ll notice that all of our tools have, for example,
icons, um, and graphics, so that folks can see — right? — so that regardless if you
have a cognitive disability, for example, you’re able to easily explain what — what
the — what the item is when you’re creating a budget.
Um, but it did really create an easy way for us to help someone, you know, set up a budget,
particularly if you have, um — if you’re on not only a limited income but if, um — if
you’re on public benefits. Um, our toolkit uses this cashflow budget, but if you know
that you have a set, um, income and set expenses, then a simple budget tool is what they asked
for us to develop for them, um, and specifically for youth and young adults with disabilities.
So, yes. Kayce?
Thank you. I use the “Your Money, Your Goals” toolkit, and I’ve enjoyed using it very much.
Thank you for creating it. I think it creates a wonderful baseline, and — and that it’s
an open toolkit allows us to customize that as we need in our own markets, and I’m — I’m
grateful for that resource. When might you plan to launch a mobile app,
um, something that’s more electronic, obviously, than the paper toolkit?
Yeah, so I can, um, speak to that. So, actually, the bundle — or the — the booklet that we
passed around — um, this actually started as a digital, um, plan, to be honest with
you. Um, we did a lot of testing, um, but the idea was to do exactly what you just asked
for, which was to make “Your Money, Your Goals” and somehow digitalize it. Um, and we worked
with a contractor in order to do that. Um, through that process, we went through
a whole bunch of focus group work with the people that are using “Your Money, Your Goals,”
and, um — and we were really — I’m quite surprised to hear back from them that they
were not ready for digital. Um, they really still wanted something that was analog, you
know? And so, uh, they said that, look, they’re
going out in the field on a regular basis. Um, uh, they need to have something they can
pull out of their — pull out of their briefcase. Um, they don’t have stable internet connections
all the time where they are. Um, they don’t have, you know, real — I mean, social service,
um, um, um, um — that they — they don’t always have the equipment that they need — it
depends state by state — um, in order to be able to pull it up electronically. And
so, we actually ended up going back to — to analog with this, um, um, and — as the solution.
Uh, we are looking at, um, um, some steps to — to — to move more, uh — move back
into looking, uh, at — at digital, um, um, but that’s probably going to start, um, probably
the third quarter of this year that we’re going to start to reexamine that.
Thank you. Yeah.
Ric? Just to echo what everybody else has said
— yeah, great, great materials. Um, and then, one — one of the things that Olivia mentioned
is that it — it does become difficult to initiate the conversation, uh, with individuals
to talk to them about planning for their future. Um, you know, we’ve — we’ve done a lot of
work in our financial health centers to educate our staff not to be responsive to offer a
product or a service but, quite frankly, just to listen and understand what’s important
to the member. And in that process, we often find is that individuals may be coming in
wanting to get a certain product, but there’s something else at the core of it.
Um, so we’ve utilized the CFSI’s health scores, uh, to really understand the type of situation
that individuals are in, and oftentimes, some individuals who are not ready for this, they’re
in a situation in which, um, they’re unable to think beyond the day, they’re in a situation
in which they need, um, bigger, long-term help, uh, and they’re unable to objectify
themselves and follow a — a toolkit. Um, and so, for us, our goal has been to really
nurture and develop a longer relationship, um, in which they can — we can develop trust,
so that we can help them in the long term and resist the urge to offer them products
that they think they need but that might not be in their best interest.
That’s right. I mean, that’s a really, very, very good point, and, uh, again, you know,
we’ve been in listening mode from the very beginning with this toolkit. Um, we — we
tested it with, um, over 1,400 social service agencies — uh, I’m sorry, individuals, and
actually, we followed up with them with, um, questionnaires afterwards to find out how
many, after they had gone through a training, had used it, and we were really surprised.
It was a high number. It was about 85% that after 6 months had remembered the training
they had gone through and had used it. What we found was, again, you know, we just
didn’t — they — they were very reluctant to even have that discussion with folks. Again,
we don’t want them to go too far, you know, and they can’t, to be honest with you, because
they’re already doing all the things that they have to do, um, in their regular day
work, right? Um, but we wanted them to have some confidence, um, and many of them are
also lower income, right? Social workers are not paid a lot of money, and so they — we
found that they have increased their confidence, um, as far as navigating and understanding
the — these issues, as well. But you’re absolutely right, we have to meet people where they are.
David? They didn’t want to let me talk. So, uh, first
off, I want to commend you. This is fantastic, and, um, I, personally, was unaware of the
tool, and we will be using it at my credit union, um, probably in the next month. So,
uh, again, just a fantastic tool. Regarding and talking more about the digital
solution, was there a discussion and development to integrate into current mobile banking providers
within the banking and credit union world, and then, also, the personal financial management
tools, as well, that’s available? Um, and so, there’s couple of popular players in our
space. Um, was that — was that part of the discussion and research, and if not, if that’s
something you’re going to do in the future, I know my credit union would love to be the
beta and to help support that initiative. We — we would love to talk to you more about
that, and actually, we were just recently at the CFSI conference, and we met with some
— some, uh, different, um, folks from the private sector, and, uh, many of them indicated
a lot of interest in actually taking this and adapting it.
Um, again, this is completely open sourced. We’ve heard — You know, in fact, I had a
bank that reached out to me not that long ago and — and said, well, can we use this,
and can we put our logo on it? And we said, by — by all means. That’s — that’s what
we want. And you’ve already heard of an example of — of — of — of — of one of your colleagues
that’s actually done that. And so, you know, we fully would love to see that, and we’d
love to be part of that. Amy?
Thank you. Um, to underscore Ric’s comment regarding meeting members where they’re at,
oftentimes, we are receiving referrals from community organizations who are, uh, referring
a member to us, uh, in a — in a time of immediate need, a crisis, and maybe that crisis is,
they need $250 to, uh, pay a medical bill or get tires for the car to get to work or
something that really needs to be able to get them through the day, and then we’re circling
back, after, regarding financial empowerment tools.
And so, to have the digitization of these materials really helps build and strengthen
a pipeline with — with the organizations that we work with, because we are sharing
information back and forth to make sure that this member is taken care of holistically,
not just with that immediate cash need but longer term. Um, and as we’re working with
these organizations, we are communicating regarding what kind of financial literacy
tools or empowerment has — has been provided and received, and — and are they retaining
that information. So, um, you mentioned discussion is happening third quarter. We support that.
Great. So, whatever next steps can happen, certainly,
um, I know from a community organization perspective and how we work with, uh, local groups, that
would be exceptional to have that available. Wonderful. And I’ll just mention, also, that
we are currently recruiting, um, new cohort members every year through our contractor.
We will, um, choose about, um, 40 organizations to work with, and we’ve worked with organizations
from United Way of America to Catholic Charities to some of the, um, private-sector groups
that I mentioned earlier, um, and, um — and it really — it takes that kind of, um — It’s
not just that we’re training; we’re also learning and hearing from them about how to modify
these tools. So, we would, um, love to see, you know, folks
from here that might be interested, um, in helping to inform that, and I’ll follow up
with Matt, and, uh, we can follow up with you when we start to have that discussion.
Carrie? Yeah. First of all, I agree. This is an excellent
guide, and it — it’s very practical. I could see us reaching out to some partners in our
community and using it as our curriculum. And this is, perhaps, a little bit premature,
but my follow-up question would be, um, have you considered offering, sort of, a supplemental
guide to people with disabilities who are not low income? Um, and the reason being is
that there are a lot of people in the disability community who are gainfully employed, who
are, financially, relatively stable, but given those disabilities, there are unique challenges
that they also have that wouldn’t, maybe, necessarily, be covered by what somebody traditionally
thinks of as — as a physical disability. Um, our office, the Office of Financial Empowerment,
is focused on economically vulnerable, low-and-moderate income, um, consumers. Um, however, you’ll
find that both in the toolkit and also in this companion guide, there are tools and
resources that would benefit everyone, regardless of where they are on the income scale.
Um, and I will say just two points to you, Ricardo, about how difficult it is sometimes
to start the conversation. We find that, you know, you don’t know what you don’t know,
and that, oftentimes, we need to demystify, um, and bust a lot of myths that are out there,
you know, when it comes to, for example, in the community, being able to build your savings
and going out there and raising awareness about the ABLE account, um, or when it comes
to, you know, working and working pays, um, and helping folks understand that, um, you
can, in fact, do it and not risk, you know, again, your benefits.
Um, the tools that we have — um, to the point about going digital, one of the things that
are really exciting about it is that they do live up on our website now, but that they
are electronically fillable. They were designed in InDesign, um, which means they also auto-calculate
and, um, you could save them and — and share them. So, if you have non-profit organizations
that you’re partnering with, and others, that you could save that information and then,
you know, um, uh, uh, with the permission, of course, of the consumer, share it, um,
so that you have a more comprehensive way of serving the individual.
Anyone else? You’re — we’re going to end 5 minutes early.
Is that okay? That’s — So, thank you for, uh, your attendance today.
Thank you to our, uh, speakers from the CFPB. Um, have safe travels home. Enjoy the rest
of the day, and the meeting’s concluded. Thanks again.