CFPB Tackles Financial Literacy

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[author: Brian Politano]

The CFPB faces no easy task, but inspiration may be found in similar efforts outside the U.S.

In the world’s financial capital, financial literacy is surprisingly poor. In fact, a recent study published in the Wall Street Journal found that the average score on a short Financial Literacy test was below 60%.

Although the financial education of taxpayers plays a key role in ensuring the vitality of the U.S. economy, such efforts have historically been given scant funding and attention. That may be about to change.

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act called for the creation of a Bureau of Consumer Financial Protection, intended to promote strong financial literacy as a first line of defense against abusive practices. While some have questioned how the Bureau can accomplish this, similar efforts outside the US provide ample inspiration.

In Honduras, an NGO known as Global Brigades has had remarkable success promoting financial literacy on a grassroots level. The Brigades’ model turns on identifying a key target audience, such as children, for education efforts that focus on financial strategies that are basic to daily living, such as saving, interest rates, and budgeting for expenses. This target audience can, in turn, education efforts on their own with peers.

Financial education efforts in Canada have even resorted to deception for a good cause.

Canadian provincial securities regulators have created a fake but very realistic website for a fictional hedge fund known as BlueHedge that offers apparently enticing investing opportunities. When convinced investors attempt to contact the Company, the website reveals that it is fake and highlights the warning signs of fraud that the investor may have missed.

While the CFPB faces no easy task, programs such as Global Brigades and Blue Hedge offer valuable direction.