As part of its Project Catalyst, the CFPB’s initiative for facilitating innovation in consumer-friendly financial products and services, the CFPB has announced a new research pilot using insights from behavioral economics and an American Express trial program to evaluate the effectiveness of certain practices to encourage prepaid card users to develop regular saving behavior. The CFPB hopes the pilot will help it better understand how to promote saving among consumers, particularly among low- and moderate-income prepaid card users who may not have traditional savings accounts.

According to the CFPB, American Express has agreed to share with the CFPB insights from a feature of one of its prepaid card programs that allows cardholders to create a subaccount within their main prepaid account dedicated for savings. To spend money saved in the subaccount, a consumer must manually transfer funds back to his or her main account. The card also has automatic transfer functions that allow consumers to schedule regular fund transfers from the main transaction account to the subaccount.

American Express plans to conduct a marketing campaign to educate cardholders about the benefits of saving and encourage use of the subaccount feature and will offer promotional incentives to encourage saving. American Express will conduct a randomized controlled trial to assess results in a statistically meaningful way.

The research pilot is part of the CFPB’s efforts to carry out its Dodd-Frank mandate to improve the financial literacy of American consumers, and in particular, its charge to provide
consumers – especially low-to-moderate income consumers – with wealth-building strategies. We continue to view this as one of the CFPB’s most worthwhile mandates and believe American Express should be applauded for agreeing to work with the CFPB in furtherance of this mandate.