The Trump administration may be saying all the right things when it comes to raising the level of financial literacy in the U.S. But upheaval at the Consumer Financial Protection Bureau is undermining any good intentions.
Financial literacy initiatives appear to have ground to a halt inside the bureau, along with many other activities. Financial education research projects that are in the budget and ready to go have not gotten final approval. Contracts with financial literacy program developers that have been bid on and awarded have not been signed.
In a statement, Gail Hillebrand, associate director of consumer education and engagement at the CFPB, said, “The Bureau remains committed to providing financial education, and has continued its vigorous efforts.”
The slowdown is all part of the administration’s effort to dial back the bureau’s authority. Acting Director Mick Mulvaney has put all programs up for review. He will seek comment on enforcement, supervision, rulemaking, market monitoring, and education activities—a process that could take many months. He has already issued a formal Request for Information on civil investigation demands. Next week, he will issue a so-called RFI on the enforcement process.
Investigations, enforcement and rulemaking are his primary targets. We’ve known that since before Mulvaney took control in November. The Trump administration believes the former director, Richard Cordray, overstepped his authority in those areas. Mulvaney is like-minded. He is a long-time critic who once called the CFPB a ”joke … in a sad, sick kind of way.”
Yet when Mulvaney took control many in financial literacy circles took heart. With things like investigations and enforcement in his crosshairs, they believed financial literacy—a mission akin to motherhood and apple pie—would be spared as a PR move if for no other reason. Now, it seems those expectations were misplaced.
The administration did its part to feed hope among those in the financial literacy community. In October, Education Secretary Betsy DeVos formally declared that financial literacy is one of her department’s 11 priorities. Earlier, President Trump signed a proclamation declaring his support for financial capability programs.
In December, at a public meeting of the Financial Literacy and Education Commission, Mulvaney said the administration’s goal is to bring prosperity to as many Americans as possible and that “if they don’t also have financial literacy at the same time that prosperity will not be sustainable.”
Treasury Secretary Steven Mnuchin chimed in: “Financial independence is furthered by financial education.” He added that we all have the “shared goal” of more Americans “being financially capable.” Like I said: motherhood and apple pie.
Further raising hopes: the president’s daughter, Ivanka Trump, sat in the first row at the FLEC meeting. She has a stated interest in promoting…
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…entrepreneurship, women in business and youth enrollment in science, technology, engineering, and math classes. Perhaps Ivanka’s presence at the FLEC meeting signals this president’s twist on the financial literacy mission. He has said he believes in entrepreneurship as a means to financial security.
For now, though, policymakers are carving few new inroads as they relate to financial literacy. The CFPB, which works closely with FLEC, is the chief federal force behind financial education, and job one appears to be shutting things down.
As if Mulvaney’s exhaustive review is not enough proof of a slowdown, last month the acting director requested zero funds to run the CFPB in the coming quarter. That hasn’t happened in the bureau’s seven-year history and sends a strong signal that CFPB programs will stay on the shelf indefinitely. The bureau gets its funding from the Federal Reserve and has routinely requested—and been given—tens of millions of dollars every quarter. Last year’s requests totaled $217 million.
Underwriting research and encouraging academics to build on that research is a key function of the CFPB’s financial education wing. The slowdown of activities will leave a lot financial literacy research unfinished for the foreseeable future.
In its annual report on financial literacy last fall, the CFPB noted that key elements of its work include “foundational” research on financial well-being, identifying “specific practical approaches” that lead to better money decisions, and research that supports “innovations in financial services” to help individuals make better choices. The CFPB has a number of promising programs in the pilot phase. Follow up is now uncertain.
Among the pilot programs are the Youth Employment Success campaign where young workers receive financial guidance as they receive their first paychecks, the Youth Savings pilot where youngsters learn about money by opening a savings account, the Ready, Set Save program where taxpayers commit a portion of their tax refund to savings, a program with H&R Block that also saves tax refunds, and an auto saving program through American Express prepaid cards.
Such programs have shown varying degrees of success. Now, the CFPB may give up on them. That is back-pedaling in a field where much of the world is determined to move forward.
Posted in Policy & Government on January, 2018