Financial Literacy
A Federal Certification Process for Providers Would Pose Challenges Gao ID: GAO-11-614 June 28, 2011Financial literacy plays an important role in helping ensure the financial health and stability of individuals and families, and efforts to improve consumers' financial literacy have grown in recent years. Currently, hundreds of nonprofit, private, and governmental entities provide some form of financial education to Americans. The federal government does not certify or approve organizations in general that provide financial literacy, although the U.S. Trustee Program and the Department of Housing and Urban Development (HUD) have approval processes for financial literacy providers for the purposes of meeting requirements of, respectively, the bankruptcy process and certain housing programs. In response to a mandate in the Dodd-Frank Wall Street Reform and Consumer Protection Act, this report addresses (1) what is known about which methods and strategies are effective for improving financial literacy, and (2) the feasibility of a process for certifying financial literacy providers. To address these objectives, GAO reviewed relevant literature, focusing on evidence-based evaluations of financial literacy programs or approaches; conducted interviews in the federal, nonprofit, private, and academic sectors; and examined the lessons learned from the approval processes of the Trustee Program and HUD.
Relatively few evidence-based evaluations of financial literacy programs have been conducted, limiting what is known about which specific methods and strategies are most effective. Financial literacy program evaluations are most reliable and definitive when they track participants over time, include a control group, and measure the program's impact on consumers' behavior. However, such evaluations are typically expensive, time-consuming, and methodologically challenging. GAO's review of 29 evidence-based studies evaluating specific programs or approaches indicates that several have been effective in changing consumer knowledge or behavior. For example, several of these studies showed that individualized one-on-one credit counseling, employer-provided retirement seminars, and education provided in a classroom setting have had effective outcomes. However, the diversity of these programs and their evaluation methods makes drawing generalizable conclusions difficult. As a result, it appears that no one approach, delivery mechanism, or technology constitutes best practice, but there is some consensus on key common elements for successful financial education programs, such as timely and relevant content, accessibility, cultural sensitivity, and an evaluation component. In addition, several mechanisms and strategies other than financial education have also been shown to be effective in improving consumers' financial behavior, including financial incentives or changing default options, such as through automatic enrollment in employer retirement plans. The most effective approach may involve a mix of financial education and these other strategies. While a federal process for certifying financial literacy providers appears to be feasible, doing so would pose challenges. Initiating and developing such a process would necessitate that Congress or federal agencies determine which entity would administer the certification, the types of providers that would be covered, the degree of oversight required, and other aspects of the process. Some financial literacy stakeholders with whom GAO spoke cited potential benefits to federal certification. For example, some noted that it might help improve the quality of financial education providers, help consumers identify competent providers, or create greater public awareness about financial education. However, as the experiences of the Trustee Program's and HUD's approval processes show, federal certification would require financial and staff resources for administering the process. Moreover, most financial literacy stakeholders with whom GAO spoke cited additional concerns, including the potential cost and administrative burden to certified entities, the challenge of creating a single process for certifying such a diverse field, and skepticism that certification would improve the quality of financial education providers. Further, the lack of consensus about which financial literacy strategies and approaches are most effective would make certification challenging.
GAO-11-614, Financial Literacy: A Federal Certification Process for Providers Would Pose Challenges
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United States Government Accountability Office:
GAO:
Report to Congressional Committees:
June 2011:
Financial Literacy:
A Federal Certification Process for Providers Would Pose Challenges:
GAO-11-614:
GAO Highlights:
Highlights of GAO-11-614, a report to congressional committees.
Why GAO Did This Study:
Financial literacy plays an important role in helping ensure the
financial health and stability of individuals and families, and
efforts to improve consumers‘ financial literacy have grown in recent
years. Currently, hundreds of nonprofit, private, and governmental
entities provide some form of financial education to Americans. The
federal government does not certify or approve organizations in
general that provide financial literacy, although the U.S. Trustee
Program and the Department of Housing and Urban Development (HUD) have
approval processes for financial literacy providers for the purposes
of meeting requirements of, respectively, the bankruptcy process and
certain housing programs.
In response to a mandate in the Dodd-Frank Wall Street Reform and
Consumer Protection Act, this report addresses (1) what is known about
which methods and strategies are effective for improving financial
literacy, and (2) the feasibility of a process for certifying
financial literacy providers. To address these objectives, GAO
reviewed relevant literature, focusing on evidence-based evaluations
of financial literacy programs or approaches; conducted interviews in
the federal, nonprofit, private, and academic sectors; and examined
the lessons learned from the approval processes of the Trustee Program
and HUD.
What GAO Found:
Relatively few evidence-based evaluations of financial literacy
programs have been conducted, limiting what is known about which
specific methods and strategies are most effective. Financial literacy
program evaluations are most reliable and definitive when they track
participants over time, include a control group, and measure the
program‘s impact on consumers‘ behavior. However, such evaluations are
typically expensive, time-consuming, and methodologically challenging.
GAO‘s review of 29 evidence-based studies evaluating specific programs
or approaches indicates that several have been effective in changing
consumer knowledge or behavior. For example, several of these studies
showed that individualized one-on-one credit counseling, employer-
provided retirement seminars, and education provided in a classroom
setting have had effective outcomes. However, the diversity of these
programs and their evaluation methods makes drawing generalizable
conclusions difficult. As a result, it appears that no one approach,
delivery mechanism, or technology constitutes best practice, but there
is some consensus on key common elements for successful financial
education programs, such as timely and relevant content,
accessibility, cultural sensitivity, and an evaluation component. In
addition, several mechanisms and strategies other than financial
education have also been shown to be effective in improving consumers‘
financial behavior, including financial incentives or changing default
options, such as through automatic enrollment in employer retirement
plans. The most effective approach may involve a mix of financial
education and these other strategies.
While a federal process for certifying financial literacy providers
appears to be feasible, doing so would pose challenges. Initiating and
developing such a process would necessitate that Congress or federal
agencies determine which entity would administer the certification,
the types of providers that would be covered, the degree of oversight
required, and other aspects of the process. Some financial literacy
stakeholders with whom GAO spoke cited potential benefits to federal
certification. For example, some noted that it might help improve the
quality of financial education providers, help consumers identify
competent providers, or create greater public awareness about
financial education. However, as the experiences of the Trustee
Program‘s and HUD‘s approval processes show, federal certification
would require financial and staff resources for administering the
process. Moreover, most financial literacy stakeholders with whom GAO
spoke cited additional concerns, including the potential cost and
administrative burden to certified entities, the challenge of creating
a single process for certifying such a diverse field, and skepticism
that certification would improve the quality of financial education
providers. Further, the lack of consensus about which financial
literacy strategies and approaches are most effective would make
certification challenging.
View [hyperlink, http://www.gao.gov/products/GAO-11-614] or key
components. For more information, contact Alicia Puente Cackley at
(202) 512-8678 or cackleya@gao.gov.
[End of section]
Contents:
Letter:
Background:
Although Definitive Evidence Is Lacking on What Is Most Effective in
Improving Financial Literacy, Some Initiatives Have Yielded Positive
Results:
While Certifying Financial Literacy Providers Is Feasible, Doing So
Would Pose Challenges:
Agency Comments:
Appendix I: Scope and Methodology:
Appendix II: Literature Review of Selected Published Research
Evaluating Financial Literacy Programs:
Appendix III: Comments from the Consumer Financial Protection Bureau:
Appendix IV: GAO Contact and Staff Acknowledgments:
Table:
Table 1: Selected Published Research Evaluating Financial Literacy
Programs, 2000-2011:
Abbreviations:
Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection
Act:
FDIC: Federal Deposit Insurance Corporation:
FINRA: Financial Industry Regulatory Authority:
HUD: Department of Housing and Urban Development:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 28, 2011:
The Honorable Tim Johnson:
Chairman:
The Honorable Richard C. Shelby:
Ranking Member:
Committee on Banking, Housing, and Urban Affairs:
United States Senate:
The Honorable Spencer Bachus:
Chairman:
The Honorable Barney Frank:
Ranking Member:
Committee on Financial Services:
House of Representatives:
Financial literacy--the ability to make informed judgments and to take
effective actions regarding money--plays an important role in ensuring
the financial health and stability of individuals and families.
Economic changes in recent years have further highlighted the need to
ensure that consumers can make informed financial decisions. For
example, the recent financial crisis revealed that many borrowers did
not fully understand the risks associated with alternative mortgage
products. Efforts to improve Americans' financial literacy have grown
in the past decade, and although research on financial literacy has
also grown, we still know little about the effectiveness of these
efforts. Currently, hundreds of nonprofit, private, and governmental
entities provide some form of financial education to Americans. The
federal government plays a role in regulating or overseeing certain of
these providers to meet statutory requirements in selected cases, but
there is no broad federal approval or certification process for
entities that provide general financial education.
This report responds to a mandate included in the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank Act), which
directed us to study ways of improving financial literacy and the
feasibility of certifying organizations that provide financial
literacy.[Footnote 1] This report responds to that mandate by
examining (1) what is known about which methods and strategies are
effective for improving financial literacy, and (2) the feasibility of
a process for certifying financial literacy providers and the benefits
and challenges of doing so. For the purposes of this report,
"financial literacy providers" generally refers to organizations,
rather than individuals, and excludes entities that provide
individualized advice for compensation, such as investment advisers or
financial planners. In addition, our examination of a potential
certification process for financial literacy providers focused on a
process that would be operated or overseen by the federal government.
To address these objectives, we conducted a literature search of
studies, reports, and articles developed by academic researchers, the
nonprofit sector, and government agencies that evaluated the
effectiveness of financial literacy and education efforts. In
addition, we conducted interviews with and obtained related documents
from representatives of federal agencies whose missions involve
consumer education or protection, including the Consumer Financial
Protection Bureau, Federal Deposit Insurance Corporation (FDIC),
Federal Trade Commission, Board of Governors of the Federal Reserve
System, Department of the Treasury (Treasury), and Securities and
Exchange Commission; nonprofit organizations that provide or advocate
for financial literacy and education; representatives from the
Financial Industry Regulatory Authority (FINRA) and the banking and
financial services industries; and selected academic researchers who
focus on financial literacy. To assess the feasibility of a process
for certifying financial literacy providers, we solicited the views of
these parties on that topic in semi-structured interviews. To help
inform the steps and resources that might be required for a
certification process, we reviewed the processes used by the
Department of Justice's U.S. Trustee Program to approve and oversee
credit counseling agencies and debtor education providers in
accordance with provisions of the Bankruptcy Code and by the
Department of Housing and Urban Development (HUD) to approve and
oversee organizations participating in its Housing Counseling Program.
We reviewed and analyzed related documents and interviewed staff from
these agencies. In addition, we gathered data from the Trustee Program
and HUD on staff and monetary resources used for their approval
processes and on the number of approved entities. We determined that
these data were sufficiently reliable for our purposes. A more
extensive discussion of our scope and methodology appears in appendix
I.
We conducted this performance audit from September 2010 to June 2011
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
Financial literacy has been defined as the ability to use knowledge
and skills to manage financial resources effectively for a lifetime of
financial well-being. To make sound financial decisions, individuals
need to be equipped not only with a basic level of financial knowledge
but also with the skills to apply that knowledge to financial decision
making. Thus, financial literacy encompasses both financial education--
the process of improving consumers' understanding of financial
products, services, and concepts--as well as consumers' behavior as it
relates to their ability to make informed judgments. In the United
States, a number of trends have emerged in recent years that
underscore the importance of financial literacy. For example,
investment options and credit products have grown in number and
complexity. In addition, consumers are assuming greater responsibility
for their own retirement savings, with traditional defined-benefit
retirement plans becoming increasingly rare. Evidence suggests that
many U.S. consumers could benefit from improved financial literacy. In
a 2010 survey of U.S. consumers prepared for the National Foundation
for Credit Counseling, a majority of consumers reported they did not
have a budget, and about one-third were not saving for retirement.
[Footnote 2] In a 2009 survey of U.S. consumers by the FINRA Investor
Education Foundation, a majority believed themselves to be good at
dealing with day-to-day financial matters, but the survey also
revealed that many had engaged in financial behaviors that generated
unnecessary expenses and fees and had difficulty with basic interest
and other financial calculations.[Footnote 3]
A wide variety of organizations provide financial education resources,
including nonprofit community-based organizations, consumer advocacy
organizations, financial services companies, trade associations,
employers, and local, state, and federal government entities. Some
financial literacy initiatives are aimed at the general population,
while others target certain audiences, such as low-income individuals,
military personnel, high school students, seniors, or homeowners.
Similarly, some financial literacy initiatives cover a broad array of
concepts and financial topics, while others target specific topics,
such as managing credit, investing, purchasing a home, saving for
retirement, or avoiding fraudulent or abusive practices. Efforts to
improve financial literacy can take many forms. These can include one-
on-one counseling; curricula taught in a classroom setting; workshops
or information sessions; print materials, such as brochures and
pamphlets; and mass media campaigns that can include advertisements in
magazines and newspapers or on television, radio, or billboards. Many
entities use the Internet to provide financial education, which can
include information and training materials, practical tools such as
budget worksheets and loan and retirement calculators, and interactive
financial games. Youth-focused financial education programs are
generally tied to a school curriculum. In 2009, 13 states had
requirements for a course in personal finance education prior to high
school graduation, and 34 states required personal finance education
standards to be implemented to some extent in the curriculum,
according to a survey by the Council for Economic Education.[Footnote
4]
In 2009, more than 20 federal agencies had initiatives related to
improving financial literacy. In some cases, federal agencies develop
and provide financial education directly. For example, FDIC has
developed and disseminated Money Smart, a comprehensive financial
education curriculum, and the Federal Trade Commission has developed
numerous brochures and Web resources on topics such as credit
products, identity theft, and fraudulent schemes. In other cases,
federal agencies provide grants or other support to nongovernmental
organizations that provide the direct financial education. For
example, in fiscal years 2009 and 2010, Treasury's Financial Education
and Counseling Pilot Program provided grants to eligible community and
other organizations to provide financial education and counseling
services to prospective homebuyers. The multiagency Financial Literacy
and Education Commission, which was created in 2003, was charged with,
among other things, developing a national strategy to promote
financial literacy and education, coordinating federal efforts, and
identifying areas of overlap and duplication.[Footnote 5] The
commission is chaired by the Secretary of the Treasury and Treasury's
Office of Financial Education and Financial Access provides its
primary staff support. In addition, the Dodd-Frank Act required the
establishment of an Office of Financial Education within the Consumer
Financial Protection Bureau, and the director of the bureau will serve
as Vice Chair of the Financial Literacy and Education Commission.
[Footnote 6]
The federal government does not generally certify or approve financial
literacy providers or regulate the content of the services they
provide, except in certain instances. For example, the Bankruptcy Code
requires individuals to receive budget and credit counseling from an
approved provider before filing a petition for bankruptcy and also
requires bankruptcy petitioners to complete an instructional course on
personal financial management in order to have their debts
discharged.[Footnote 7] As such, the Department of Justice's U.S.
Trustee Program approves providers who meet certain criteria to
provide these services. In addition, HUD approves housing counseling
agencies to provide certain services and awards competitive grants to
approved agencies to fund those services.
Although Definitive Evidence Is Lacking on What Is Most Effective in
Improving Financial Literacy, Some Initiatives Have Yielded Positive
Results:
Relatively Few Evaluations Have Measured Financial Literacy Programs'
Effect on Consumer Behavior:
While there is a fairly extensive literature on financial literacy,
relatively few evaluations of financial literacy programs have been
published that use empirical evidence and even fewer evaluations
measured a program's impact on the participants' behavior. One reason
for this may be that the field of financial literacy is relatively new
and many programs have not been in place long enough to allow for a
long-term study of their effectiveness; for example, many of the key
federal financial literacy initiatives were created only within the
past 10 years. In the view of some experts and practitioners in the
field of financial literacy with whom we spoke, the approaches that
are most effective in meaningfully improving consumers' financial
behavior are not fully known.
After conducting a literature search, we identified 142 papers
published since 2000 that addressed the value or effectiveness of
financial literacy and were authored by individuals or organizations
that appeared to have significant experience or expertise in the
field. We focused our review on 29 studies we identified among this
group that met four additional criteria.[Footnote 8] First, they
evaluated the outcomes of a specific program, approach, or policy.
Second, they used empirical evidence--that is, they used data rather
than anecdotal evidence. Third, they were based on original data
collection rather than reviews of existing literature. Finally, they
were determined to be sufficiently reliable and methodologically
rigorous for inclusion in our review.[Footnote 9]
The evaluations of financial literacy programs that are most reliable,
useful, and definitive include three key elements, according to some
experts with whom we spoke and literature that we reviewed: they
measure behavioral change, track participants over time, and use a
control group. The extent to which the studies we reviewed
incorporated these elements varied:
* Measure behavioral change: Of the 29 studies we reviewed that
evaluated the effectiveness of a financial literacy program or
initiative, 22 measured, among other things, its impact on the
participants' behavior. The remaining seven studies did not measure
the program's impact on behavior but instead measured outcomes such as
improvements in knowledge, attitude, or anticipated behavior. In
general, the ultimate goal of financial education is to favorably
affect consumer behavior, such as to promote improved saving and
spending habits, wise use of credit, and avoidance of fraudulent or
disadvantageous financial products. A financial education program may
be of limited effectiveness if, for example, it increases
participants' knowledge of retirement savings issues but does not
actually affect, on average, participants' behavior through increased
retirement contributions or other measures.
* Track participants over time (longitudinal): Eighteen of the 29
evaluations we reviewed were longitudinal--they involved the repeated
examination of the study participants over time. Longitudinal studies
of financial education programs can be important because these
programs often seek to affect long-term outcomes, such as improved
credit scores or increased retirement savings, that may occur several
months or years after the end of the program. For example, a financial
education program that seeks to increase homeownership would, ideally,
track whether participants had become successful homeowners over a
period of many years.
* Involve a control group: Seven of the 29 evaluations we reviewed
used a control group--that is, the evaluation measured participants in
the financial education program against a comparison group that did
not participate in the program. Use of a control group helps to
isolate the impact of a financial education program from other
influences, such as changes in the overall economy, and provides a
baseline against which to compare the program's effect. It also can
help avoid selection bias because individuals who choose to
participate in a financial education program may be those who are most
interested and motivated to change or who place a greater value on
their future.
Experts in financial literacy and program evaluation have cited many
significant challenges to conducting rigorous and definitive
evaluations of financial literacy programs that include these
elements. For example, measuring a change in participant behavior is
much more difficult than measuring a gain in knowledge, which can
often be captured through a simple post-course test. Measuring
behavior often relies on self-reported information, which can be
inaccurate, or may require tracking credit scores, account balances,
or other data that may be proprietary. Moreover, many organizations
lack the financial resources or expertise to conduct program
evaluation, particularly long-term evaluation involving a control
group, which can be especially time and labor intensive. This is often
the case when evaluations require tracking populations that are more
transient in nature, such as college-aged individuals. In addition,
because many variables can affect consumer behavior and decision
making, ascribing long-term changes to a particular program is
difficult. Moreover, some of the evaluation literature we reviewed
noted that longitudinal studies using a control group and measuring
behavioral change cannot be practically or realistically applied to
all programs.
Consequently, many evaluations rely on other measures that are less
complex and less resource intensive to measure, such as knowledge
gains, changes in attitudes, or outputs. One academic review of
financial literacy evaluations found that the majority of financial
education programs it reviewed only measured program outputs, such as
the number of individuals served or the volume of materials
distributed.[Footnote 10] The 2008 National Research Symposium on
Financial Literacy and Education noted that one challenge in
developing and implementing successful program evaluation for
financial education is the field's variety of core content, delivery
methods, and target populations, as well as differences in the goals
and objectives of specific programs.[Footnote 11] Therefore,
identifying a common set of reliable methods and measures that can be
used to make broad-based comparisons across programs can be difficult.
For example, the appropriate evaluation for a media campaign that
seeks broadly to increase consumer awareness may be very different
from the evaluation of an individualized counseling program.
Although Some Financial Education Programs Have Shown Positive
Results, Generalizing Those Results Is Difficult:
The 29 evaluations of financial education programs we reviewed showed
that some programs are effective in changing consumer behavior or
otherwise demonstrating positive outcomes. For example, certain
programs using approaches as diverse as individualized one-on-one
credit counseling, employer-provided retirement seminars, and
education provided in a classroom setting have each been shown to have
effective outcomes. However, the heterogeneity among the programs
evaluated and the nature of the evaluations themselves make
generalizing or drawing conclusions about exactly which methods and
strategies are most effective in improving financial literacy
difficult. In addition, the studies we reviewed did not always have
consistent results. For example, studies examining the effectiveness
of state-mandated financial education have sometimes had conflicting
conclusions. As a result, it appears that no single approach, delivery
mechanism, or technology necessarily constitutes the best practice for
improving financial literacy.
Results of the studies we reviewed show that individual financial
literacy programs have had positive results. Further, some of these
programs have had a positive impact on participants' financial
behavior and not just on their knowledge. Of the 29 studies we
identified as meeting our criteria, 15 evaluated classroom-based
initiatives aimed at young people, 8 evaluated classroom-based
initiatives aimed at adults, and 6 evaluated other delivery
mechanisms, including one-on-one counseling and content offered via
the Internet, newsletters, and video. In addition, two of the studies
assessed financial literacy programs operated by the federal
government: FDIC's Money Smart and the U.S. Army's Personal Financial
Management Training. (Additional information on the 29 studies that we
focused on is in appendix II.)
Youth Classroom Education:
We identified 15 studies that evaluated the effectiveness of classroom-
based programs or curricula designed to improve financial literacy
among elementary, high school, or college students. Generally, these
studies found that classroom curricula on general financial education,
which covered topics such as spending, saving, and budgeting,
increased students' knowledge of these topics. Ten of the 15 studies
also assessed the impact of a program on students' subsequent behavior
and found mixed results. Examples of studies that address youth
classroom education include the following:
* The National Endowment for Financial Education's High School
Financial Planning Program, a high school curriculum on basic
financial planning concepts, was evaluated in 2003-2004 by independent
academic researchers. The study found that students who participated
in the program experienced significant improvement in their financial
knowledge, behavior, and confidence by the end of the course. In
addition, about 60 percent of participants had positively changed
their spending and savings patterns 3 months after the program had
ended.[Footnote 12]
* In 2008, an outside research firm assessed Junior Achievement's
Finance Park, a 6-week economics education program designed for middle
school students that combined classroom instruction with a daylong
role-playing exercise. Using surveys conducted before and after
students had participated in the program, the study found
statistically significant improvement in students' content knowledge,
such as their ability to develop a personal budget. It also found that
their confidence in monetary decisions and ability to be successful
had increased.[Footnote 13]
* A 2007 study by researchers at Ohio State University used a Web-
based survey of university alumni to investigate the impact of
personal finance education delivered in high school and college. The
study found that participating in a high-school or college-level
personal finance course did not result in improvements in savings
rates among participants. Individuals who had participated in a
college-level personal finance course were found to have higher levels
of knowledge about investment issues, although no such effect was
found for individuals who had taken a personal finance course in high
school.[Footnote 14]
In addition, we identified four studies that attempted to assess the
effect of legislative mandates that exist in certain states requiring
school districts to include personal finance instruction in middle
school or high school curricula.[Footnote 15] As noted earlier, as of
2009, 13 states required students to take a personal finance course as
a high school graduation requirement.[Footnote 16] Three of the
studies we reviewed reported that students in states that mandated
financial education were more likely to have greater financial
knowledge or better financial behaviors, such as increased rates of
saving.[Footnote 17] For example, a 2001 study used a national survey
to determine the long-term behavioral effects of high school financial
curriculum mandates.[Footnote 18] The study found that respondents who
graduated when state-mandated financial education was in effect had
higher saving and wealth accumulation rates than those respondents who
had graduated prior to such a mandate. In contrast, a study conducted
in 2009 by researchers at Harvard Business School came to a different
conclusion.[Footnote 19] Reviewing data from three U.S. Censuses, the
researchers found that individuals whose curriculum included state-
mandated financial education had saving rates identical to those of
students in the same state who graduated prior to the state mandate.
However, there are limitations to the methodologies used to assess the
effect of legislative mandates. For example, some of these studies
rely on proxy measures, such as when the participant likely graduated
from high school, to determine whether the person participated in a
mandated financial education program. Further, these studies do not
typically discern the impact of the mandate from other important
factors, such as changes in the overall economy, that affect financial
behaviors.
Adult Classroom Education:
We identified eight studies that reviewed the effectiveness of
classroom-based programs or curricula designed to improve financial
literacy among adults. Some of these programs provided general
financial education and others focused on particular topics, such as
preparing for retirement. In addition, some of the programs were aimed
at a general population, while others targeted specific populations,
such as service members or individuals with low incomes or substantial
debt. With some exceptions, programs reviewed were found to be
effective in improving financial knowledge and behaviors, particularly
among participants with the least education or who faced significant
financial challenges. Examples of these studies include the following:
* A 2007 study conducted by FDIC evaluated Money Smart, a
comprehensive financial education curriculum designed to help low-and
moderate-income individuals enhance their financial skills and create
positive banking relationships. The study surveyed individuals prior
and subsequent to their participation in the program and followed up
by telephone 6 to 12 months after their final class. The study found
that participants in the Money Smart training were more likely to
engage in positive behaviors after completing the course, including
opening deposit accounts, saving money in a mainstream financial
institution, and adhering to a budget.[Footnote 20]
* Researchers studied the effect of a 2-day financial education course
taught to soldiers by college instructors. Soldiers who finished the
course completed a follow-up survey of financial behaviors and the
results were compared to those of a control group of soldiers who had
not taken the course. Soldiers who had taken the financial education
course were more likely to have engaged in positive behaviors, such as
comparison shopping, saving, and paying bills on time. However, when
the researchers controlled for other factors, only two sets of
behaviors were associated with the financial education course.
[Footnote 21] First, those soldiers who had the financial education
course were more likely to know the difference between discretionary
and non-discretionary spending. Second, contrary to what might be
expected, those soldiers who had taken the course were less likely
than the comparison group to report using a formal spending plan and
more likely to report using an informal spending plan.
Other Delivery Mechanisms:
Six of the studies we reviewed evaluated financial literacy
initiatives that were not delivered in a classroom setting. These
studies included assessments of credit counseling and housing
counseling delivered one-on-one, counseling provided via the Internet,
and content delivered through newsletters or on video. In general,
these studies suggest that a variety of different delivery mechanisms
can be effective in improving financial literacy. Examples include the
following:
* A 2011 study compared outcomes for individuals who received face-to-
face credit counseling with similarly situated consumers who opted for
counseling via technological methods, such as telephone or Internet.
Counseling outcomes were measured using data from participants' credit
reports 1 or more years following the original counseling. Delivery of
credit counseling via the telephone or Internet was found to generate
outcomes no worse than--and in some cases better than--face-to-face
delivery of counseling services.[Footnote 22]
* A study conducted by researchers from Freddie Mac in 2001 compared
the loan performance over time of homebuyers who received pre-purchase
homeownership counseling with participants in the loan program who did
not receive such counseling. Those borrowers who received one-on-one
counseling were less likely to have a 60-day delinquency on their
loans during the study period than other borrowers with equivalent
characteristics who had not had counseling. However, borrowers who
received counseling via the telephone or through a course of home
study showed no reduction in delinquency.[Footnote 23]
Increasingly, technological resources are being used to provide and
evaluate financial literacy. In particular, the Internet has proved to
be an important tool for disseminating information and education about
financial issues to consumers, and one study found that the number of
Web sites that provided financial education almost doubled between
2000 and 2005.[Footnote 24] Some organizations have used interactive
video games to provide financial education, particularly for youth.
For example, Junior Achievement has developed an online version of its
Finance Park simulation to complement its traditional in-person
interactive model. Technology can also be used to evaluate program
effectiveness. A panel of experts convened by the New America
Foundation in 2008 noted that online tools, such as interactive Web
tools that allow students to set and measure their progress towards
financial goals, can be used to collect data to assess the behavioral
impact of a financial education program. These online tools provide
flexibility to capture a number of measures on an ongoing basis for a
large population.[Footnote 25]
The Financial Literacy and Education Commission and many federal
agencies have recognized the need for a better understanding of which
programs are most effective in improving financial literacy. For
example, the commission's original national strategy in 2006 noted
that more research and program evaluation were needed so that
organizations are able to validate or improve their efforts and
measure the impact of their work. In response, in October 2008, the
Department of the Treasury and the Department of Agriculture convened,
on behalf of the commission, the National Research Symposium on
Financial Literacy and Education, which discussed academic research
priorities related to financial literacy. The commission's new 2011
national strategy sets as one of its four goals to "identify, enhance,
and share effective practices." The new strategy sets objectives for
reaching this goal, which include encouraging research on financial
literacy strategies that affect consumer behavior, establishing a
clearinghouse for evidence-based research and evaluation studies,
developing and disseminating tools and strategies to encourage and
support program evaluation, and forming a network for sharing research
and best practices. At the same time, because of fiscal constraints,
the overall level of future federal resources that will be devoted to
financial literacy research and evaluation is unclear. For example,
the Social Security Administration requested no funding in its fiscal
year 2012 budget justification for its Financial Literacy Research
Consortium, which provides research grants to improve financial
literacy and retirement planning; the consortium had been funded at
about $9.2 million in fiscal year 2010 and had estimated obligations
of $10 million in fiscal year 2011.
Stakeholders Cited Certain Common Elements Desirable for Financial
Literacy Programs:
Despite limited empirical evidence on the effectiveness of financial
literacy programs, experts and practitioners in the field of financial
literacy generally have identified certain elements that they consider
desirable in almost any financial literacy program. The views of these
stakeholders are not necessarily based on concrete data but rather on
anecdotal evidence, experience in the field, and a broader body of
research on program design and behavioral economics. For example, in
2004, Treasury's Office of Financial Education and Financial Access
published a list of the elements of a successful financial education
program, which was intended to guide financial education organizations
in developing programs and strategies.[Footnote 26] Similarly, in
2005, the Organization for Economic Cooperation and Development issued
a set of principles and good practices to help guide financial
education and awareness programs.[Footnote 27] Some nongovernmental
organizations have also developed recommended practices for financial
literacy programs. For example, the Jump$tart Coalition for Personal
Financial Literacy has developed best practices for personal finance
education materials.[Footnote 28] Based on the guidelines of these
organizations and our interviews with experts and practitioners, the
following elements are considered desirable for successful financial
literacy programs:
* Content that is relevant and timely. Financial literacy programs may
be more effective if they are relevant to their target audience. For
example, people need different kinds of financial information at
different phases of their lives. College students may need to learn
how to be prepared to enter the workforce, working adults may need
information on managing credit and investing for retirement, and
retirees may need information on managing their retirement funds. In
our 2004 forum on financial literacy, experts noted that financial
education is most effective when it comes at the right time--that is,
at the "teachable moments" that occur when the information is
applicable to events in a person's life.[Footnote 29] Some experts
have argued that financial education should be linked to specific
products and programs--for example, embedded into government income
support programs.
* Delivery methods that are appropriate for the audience or topic.
While financial education programs can be delivered in a broad variety
of formats, a program may be more effective if its delivery method is
adapted so that it is appropriate to its target demographic, engaging
to participants, and well-suited to the objectives of the program. A
2010 panel of experts convened by the National Endowment for Financial
Education highlighted the importance of tailoring the delivery method
for financial education to the audience and the program, noting that
individuals possess varying levels of financial knowledge and that
these differences need to be taken into account in program design.
[Footnote 30] For example, many experts have said that youth programs
can be more effective when they include a hands-on activity, such as a
simulation, which can make the information more true-to-life and
relevant to the participants. Similarly, research indicates that young
adults may prefer to receive financial education through the Internet.
[Footnote 31]
* Accessibility and cultural sensitivity. Programs should be
accessible to the population they seek to serve. Many stakeholders
noted the importance of offering education at times and locations that
are convenient to the target audience. Further, the success of a
program can depend on content that is understandable and culturally
sensitive. As we have reported in the past, cultural differences can
play a role in financial literacy and the conduct of financial affairs
because different populations have dissimilar norms, attitudes, and
experiences related to managing money.[Footnote 32] In addition, a
report by the Lutheran Immigration and Refugee Service states that
existing financial literacy and education materials often do not
effectively serve some immigrant populations because they do not
incorporate linguistic idioms and cultural values, such as gender
roles and religious beliefs.[Footnote 33]
* Use of partnerships. Developing partnerships among organizations
involved in delivering financial education can have several benefits,
including making more efficient use of scarce resources, facilitating
the sharing of best practices, and effectively reaching targeted
populations. For example, when Freddie Mac was developing and
implementing its CreditSmart program, which initially was geared
toward the African-American community, it partnered with five
historically black colleges and universities. Program representatives
told us that using these trusted intermediaries contributed to the
program's effectiveness. In addition, partnerships can help connect
appropriate content with an effective delivery mechanism. For example,
financial institutions, which have expertise in money matters,
sometimes provide financial education content to schools, which can
serve as an efficient means of directing that content to students.
* Program evaluation: An evaluation component, ideally built into a
financial literacy program, helps to determine whether programs are
having a positive impact on participants' attitudes, knowledge, or
behaviors. Effective evaluation often depends on establishing specific
goals and identifying performance measures that can be used to track
progress toward meeting goals, according to stakeholders at Treasury
and other organizations. As previously discussed, given the resources
required for evaluation, the extent to which program impact can be
tracked and measured may vary based on the nature and scope of the
individual program.
* Trained and competent providers. As we have previously reported,
teacher quality is an important school-level factor influencing
student learning.[Footnote 34] However, a 2009 study sponsored by the
National Endowment for Financial Education found that less than 20
percent of teachers and prospective teachers reported feeling very
competent to teach the personal finance concepts surveyed, including
money management and saving.[Footnote 35] To help offset this lack of
subject matter expertise, guidelines from the Organization for
Economic Co-operation and Development recommend that specific
financial education materials and tools be provided to the teachers.
The Jump$tart Coalition for Personal Financial Literacy has encouraged
that financial education materials provided to teachers include a
number of specific elements, including student learning objectives and
assessment tools, background information, lesson plans, and activities.
* Sustainability. Programs should have the necessary resources for
long-term sustainability and success. Treasury's Office of Financial
Education and Financial Access has noted that a successful financial
literacy program should be developed for long-term success, as
evidenced by characteristics such as continuing financial support,
legislative backing, or integration into an established course of
instruction.
Alternatives and Complements to Traditional Financial Education Have
Been Shown to Improve Consumer Behavior:
Financial education may not be the only approach--or necessarily
always the best approach--for improving consumers' financial behavior.
As noted earlier, generally the goal of a financial literacy program
is to improve a consumer's financial behavior or produce positive
outcomes, such as participation in a retirement savings plan, timely
repayment of credit, or the opening of a deposit account in lieu of
using a check-cashing service. One tool for achieving such outcomes is
financial education. However, alternative strategies or mechanisms,
sometimes in conjunction with financial education, have also been
successful in improving financial behavior. Insights from behavioral
economics, which blends economics with psychology, have been used to
design strategies apart from education to assist consumers in reaching
financial goals without compromising their ability to choose
approaches or products. These strategies recognize the realities of
human psychology, including procrastination and inertia, inability to
stick to plans, difficulty in processing complex information, and the
desire for conformity.
Literature we reviewed indicated that strategies for improving
consumer financial behavior or outcomes that were alternative or
complementary to traditional financial education can be effective.
Examples of such strategies include the following:
* Changing the default option. A default is the choice people make
when they do not deliberately choose an alternative. Because people
are prone to inertia and procrastination, the default option often
becomes the most common choice when making financial decisions. For
example, in recent years, some employers have adopted automatic
enrollment policies for their defined contribution plans--retirement
plans under which participants accumulate retirement savings in
individual accounts, such as a 401(k) plan. Under automatic
enrollment, workers are enrolled into the plan automatically, or by
default, unless they explicitly choose to opt out. As we have
previously reported, studies have shown this mechanism to be effective
for increasing participation in retirement plans.[Footnote 36] For
example, one study of employees hired before and after their company
adopted automatic enrollment found that the retirement plan
participation rate of those hired before automatic enrollment was 37
percent at 3 to 15 months of tenure, compared with 86 percent for the
group hired after.[Footnote 37]
* Using commitment mechanisms. Strategies that commit people to
specific actions in the future can be an effective way of influencing
behavior. For example, a program called Save More Tomorrow asked
employees to commit to increasing their retirement plan contribution
rates well in advance of each scheduled pay increase. The program
sought to use this commitment mechanism to help employees who would
like to save more but lack the willpower to act on this desire.
[Footnote 38] An evaluation of this program found that 78 percent of
employees offered the program joined, and 80 percent of those who
joined remained in the program for several pay raises, with their
savings rate increasing, on average, by 10 percentage points over a
period of 40 months.[Footnote 39]
* Using monetary incentives. Using incentives with tangible monetary
benefits can also be effective in changing behavior. For example,
studies have shown that employees are more likely to contribute to a
retirement plan if their employer provides matching contributions, and
the amount that an employee contributes to a plan can be influenced by
the formula for the matching contribution.[Footnote 40] Research shows
that programs that offer monetary matches can provide concrete rewards
that encourage individuals to take specific actions. In one
experiment, low-and middle-income clients of a tax return preparation
firm were randomly offered a match of 0, 20, or 50 percent on their
tax refunds that would be contributed to an individual retirement
account. Higher matches, combined with information received from tax
professionals, raised the participation rate in the savings plan and
the amount of the contribution.[Footnote 41] Similarly, an experiment
compared a random selection of eligible lower-income people who
received individual development accounts--which provide a match for
savings made for certain purposes--with a control group that was not
offered these accounts.[Footnote 42] Four years into the program, the
individual development accounts increased homeownership rates of prior
renters by 7 to 11 percentage points relative to the control group.
However, the study found that there was almost no impact on other
targeted uses, such as post-secondary education or retirement savings.
[Footnote 43] In addition, a follow-up study conducted 10 years after
the start of the program found that the homeownership rates for those
who did not receive access to the individual development accounts were
similar to those who did, suggesting that the benefits diminished over
time.[Footnote 44]
* Simplifying financial decisions. Reducing the complexity of
financial information provided to consumers and simplifying the
choices they need to make can motivate consumers to take action. A few
studies have shown that more investment options are correlated with
reduced participation in participant-directed retirement plans,
possibly because of too many choices or information overload.[Footnote
45] Further, as we have noted in prior reports on Social Security
information and credit card disclosures, certain practices help people
understand complicated information, such as writing information in
clear language, using straightforward layout and graphics, and making
options easy to compare in a single document.[Footnote 46] In one
experiment, newly hired staff at an orientation seminar randomly
received either a standard packet of information on supplemental
retirement accounts, an additional planning aid designed to simplify
enrollment, or an even simpler planning brochure. Simpler planning
information was associated with significantly higher participation
rates in retirement accounts, with enrollments for the three groups of
7, 21, and 27 percent, respectively.[Footnote 47]
* Leveraging the peer effect. People are often more comfortable making
a choice when they know that others in their peer group have made the
same choice. Incorporating individuals' tendency to want to follow
their peers can help motivate consumers to take action. In an
experiment conducted at a large university, a random sample of
employees in certain departments were promised a monetary reward for
attending a benefits fair that presented information about tax-
deferred account retirement plans. Employees were more likely to
attend the fair--and ultimately to participate in the retirement plan--
if colleagues in their department received a monetary award, even if
the employees themselves received no such award.[Footnote 48] Another
study found that an effective tool for increasing participation in
retirement accounts was to present videos encouraging participation
that included fellow employees with certain characteristics similar to
the target audience.[Footnote 49]
Much of the literature and the experts we spoke with have noted that
these various strategies to improve consumers' financial behavior and
subsequent outcomes should not be viewed as a substitute for financial
education but rather as a complement to it. The most effective
approach to improving consumers' financial decision making and
behavior may be to use a variety of these types of strategies in
conjunction with financial education.
While Certifying Financial Literacy Providers Is Feasible, Doing So
Would Pose Challenges:
A Certification Process Could Take Many Forms Depending on Its
Underlying Goals and Scope:
If the federal government were to develop a process for approving or
certifying financial literacy providers, a variety of approaches could
be taken. At present, the federal government does not have a process
for approving or certifying most organizations that provide financial
education, with two notable exceptions. As previously mentioned, the
U.S. Trustee Program approves credit counseling agencies and debtor
education providers to meet requirements of the U.S. Bankruptcy Code.
[Footnote 50] In June 2005, the Trustee Program established its Credit
Counseling and Debtor Education Unit to implement new statutory
provisions.[Footnote 51] Approximately 166 credit counseling agencies
and 265 debtor education providers were approved by the Trustee
Program as of March 2011. In addition, since 1968 HUD has had a
process for approving housing counseling agencies through its Housing
Counseling Program, and as of April 2011, there were 2,758 agencies
participating in the program, of which HUD had approved 1,047.
[Footnote 52] These agencies provide a variety of housing counseling
services and are the only ones that can provide counseling to meet the
mandatory counseling requirements of certain housing programs, such as
the Federal Housing Administration's Home Equity Conversion Mortgage
Program. Some nongovernmental entities also have certification
processes or confer designations that are related to financial
literacy. For example, the Institute for Financial Literacy--a
nonprofit organization that provides financial literacy information
and services--has recently implemented an accreditation process for
organizations that provide financial education, which will be based on
standards it has developed.[Footnote 53] Some professional and trade
organizations also confer designations--such as Certified Financial
Educator--to individuals to indicate that certain examination,
educational, or other requirements have been met. Some designations
require a certification examination; an accredited degree, training,
or relevant experience in the financial services industry; and
continuing education.
The existence of the Trustee Program's and HUD's approval processes
for credit counseling and debtor education and housing counseling
organizations, respectively, suggests that it would be feasible for
the federal government to implement an approval or certification
process that would encompass financial literacy providers more
broadly. However, initiating and developing such a process would
require that Congress or the relevant federal agency or agencies
address a number of issues, including the goals of the program, who
would administer the process, what type of providers it would cover,
what criteria or standards would apply to providers, and what degree
of ongoing oversight would be put in place:
* What are the goals of the certification process? As we have reported
in the past, defining a program's mission, strategic goals, and
desired outcomes is critical.[Footnote 54] The scope, structure, and
design of any certification process for financial literacy providers
would depend on what it set out to achieve. For example, a
certification process whose primary goal was to protect consumers from
low-quality or unscrupulous providers might have different
characteristics and design from a process whose primary goal was to
promote public awareness of financial education.
* What entity would administer the certification? A federal agency
could operate a certification process directly or, alternatively, it
could oversee or charter a nongovernmental entity to do so. Some
stakeholders in the field of financial literacy told us that if a
federal entity were to take on this responsibility, the Department of
the Treasury, the Financial Literacy and Education Commission, or the
Consumer Financial Protection Bureau would be plausible candidates.
One representative of a federal agency suggested that several federal
agencies could be involved, certifying providers that cover the topics
or address the target audience under each agency's purview. Another
model would be for the federal government to charter a nongovernmental
intermediary that would implement the certification, with a federal
agency overseeing that intermediary. This would be similar to HUD's
process of approving intermediary organizations that then oversee and
provide subgrants to branches and affiliates that provide the actual
counseling to consumers. For example, NeighborWorks America, a
federally chartered nonprofit corporation with its own nationwide
network, receives federal funds to provide grants, training, and
technical assistance to agencies that provide housing counseling.
[Footnote 55] As a HUD-approved intermediary organization,
NeighborWorks must ensure that its affiliates meet the criteria for
HUD approval and HUD does not approve each affiliate independently.
* What entities would be covered? A wide range of entities provide
some form of financial education, including community-based
organizations, large national nonprofits, trade and professional
associations, credit counseling agencies, colleges and universities,
credit unions, and private companies. Further, some of these entities
provide broad financial education, while others focus on very specific
topics. One step in developing a federal process for certifying
financial literacy providers would be to determine the scope of the
entities that would be eligible. Some stakeholders with whom we spoke
noted that trying to encompass all types of financial literacy
providers could be unrealistic. For example, applying consistent
criteria and standards among programs using very different approaches
and delivery mechanisms would be difficult. One representative of a
federal agency suggested that there be separate certification
processes based on the topics covered. The Institute for Financial
Literacy, according to its representatives, has opted for a broader
scope in developing its organizational accreditation, which is open to
organizations that provide financial education either exclusively or
as part of a wider range of services, in which case only the relevant
activities are accredited.
* What criteria would be used? Criteria would need to be developed for
determining the certification of financial literacy providers. These
criteria could include financial soundness, governance structure,
size, populations served, reputation, and nonprofit status, among
others. Criteria could also address the expertise and capacity of
providers, including years of experience and staff knowledge in
economics and personal finance education. Some stakeholders told us
that for-profit companies that market or sell financial products
should be ineligible, presumably because they may not provide unbiased
information or may be more likely to use financial education to help
sell products. Along these lines, only nonprofit organizations and
units of government are eligible to become HUD-approved housing
counseling agencies. By contrast, the Bankruptcy Code does not require
entities approved to fulfill the debtor education requirement to be
nonprofits, although it does require approved credit counseling
agencies to be nonprofits. Some bank representatives told us that,
within their industry, many entities provide financial education as a
legitimate community service and do not use it to market products. One
federal agency noted that a code of ethics could also be included as
part of the certification process to help address these issues.
* Should certification include content standards? One option for
certification would be to require that certified providers include in
their programs certain content standards, such as specific topics that
must be covered, or to require that certain core competencies be
addressed.[Footnote 56] Such standards could provide consistency and
quality in the program content offered by certified financial literacy
providers. For example, one financial literacy advocate told us that
such standards would help teachers identify high-quality content for
financial education incorporated into classroom instruction or after-
school programs. The Trustee Program's interim final rule on
procedures and criteria for debtor education providers specifies the
topics that must be covered in the personal financial management
instructional course required of bankruptcy filers prior to discharge
of their debt.[Footnote 57] HUD's Housing Counseling Program Handbook
states that HUD has the option of requiring, promoting, or
incentivizing the adoption and implementation of housing counseling
and education standards. However, HUD does not generally specify the
content its approved housing counseling agencies must cover.[Footnote
58] An alternative to specific content standards would be to certify
curricula or programs in lieu of providers. The certifying entity
would need to assess those curricula periodically to determine that
the information offered to consumers is accurate, up-to-date, and
relevant.
* What level of oversight would be conducted? A federal process for
certifying financial literacy providers would likely require some form
of oversight to help ensure continued compliance with any statutory or
program requirements. The level of oversight for certified entities
could be fairly limited, such as a simple reporting requirement on
activities performed. Alternatively, oversight could be more
comprehensive and include such things as more detailed reporting
requirements, complaint resolution, quality reviews, and
administrative proceedings to remove entities when necessary. In
addition, providers could be required to reapply regularly. For
example, the Trustee Program requires approved credit counseling
agencies and debtor education providers to reapply annually, and HUD
assesses approved housing counseling agencies for reapproval at least
every 3 years.
Federal Certification of Financial Literacy Providers Could Have
Certain Benefits:
Some representatives of federal agencies and organizations that
provide or advocate for financial literacy cited potential benefits
that could result from implementing a federal process for certifying
financial literacy providers:
* Improve overall quality. A federal certification process could
potentially improve the quality of organizations that chose to apply
for certification and would need to meet a certain set of
qualifications and standards. For example, Trustee Program officials
told us that their approval process for financial education providers
for the purposes of the bankruptcy process may have encouraged higher
standards among those providers. In addition, a certification process
could raise the quality of the financial education community overall.
For example, HUD officials noted that their Housing Counseling Program
has helped set a standard for the industry as a whole.
* Encourage greater program evaluation among providers. A
certification process could help to increase program evaluation
efforts by encouraging provider organizations to assess their ability
to meet certification standards and by requiring certified providers
to report on outcomes. Representatives from one financial literacy
organization told us that organizations that are interested in
continuous improvement could benefit from such a process.
* Help consumers identify competent providers. From the consumer
standpoint, a federal certification of financial literacy providers
could serve as a federal "stamp of approval." Representatives from one
trade association told us that certification could assist consumers
and others in distinguishing among providers.
* Increase public awareness. A federal certification process could
help draw public attention to the issue of financial literacy.
Potentially, it could give providers additional visibility, which
could raise the profile of financial literacy and encourage consumers
to seek out these resources.
* Weed out poor quality providers. Federal certification could help to
weed out poor quality or abusive financial literacy providers,
according to a few stakeholders with whom we spoke, presumably because
consumers might avoid providers that had not been certified.
* Aid in building capacity. Federal certification possibly could aid
some financial literacy providers in garnering outside funding from
foundations or other sources that they rely on for support.
Recognition by a federal agency could provide legitimacy to nonprofit
organizations that could help them leverage other resources. In
addition, two financial literacy stakeholders suggested that the
federal agency overseeing certification could serve as an information
clearinghouse for providers. This could allow them to more readily
access information on best practices, financial education resources,
and the results of research on financial literacy issues.
Certification might also provide networking opportunities among
certified providers, who might share information and resources among
themselves.
A Certification Process Could also Pose Challenges:
A federal certification process for financial literacy providers would
face certain challenges and potential downsides. Most notably,
developing, implementing, and operating a federal process for
certifying financial literacy providers would involve financial costs
and staff resources for the federal agency administering the process.
While each certification or approval process is unique, the
experiences of the Trustee Program and HUD may offer insights into the
potential resources that a broader certification process for financial
literacy providers might entail.
Experiences of the Trustee Program and HUD:
The Trustee Program spent $6.1 million between fiscal years 2005 and
2007 to develop its Credit Counseling and Debtor Education Unit, which
was created in 2005 to administer the approval of credit counseling
agencies and debtor education providers.[Footnote 59] In fiscal year
2010, the Trustee Program spent $1.6 million in salaries and benefits
for the unit, according to agency officials. The number of full-time
equivalent staff assigned to the unit between fiscal years 2007 and
2010 ranged from 13 to 18, with field staff assisting on a rotational
basis. For fiscal year 2011, 11 full-time equivalent staff had been
assigned to the unit. These staff have been responsible for developing
application forms and procedures, approving and monitoring credit
counseling agencies and debtor education providers, and taking steps
to help ensure that filers were meeting requirements. Because approved
entities must submit an application each year, staff review hundreds
of applications and reapplications annually, according to agency
officials. The officials told us that based on their experience, any
federal government process requiring periodic review and enforcement
would require substantial resources. In addition, the rulemaking
process related to approving credit counseling agencies and debtor
education providers has been lengthy. For example, the Trustee Program
is still using the interim final rules it proposed in July 2006. While
it issued proposed rules in 2008, as of May 2011, neither final rule
had been approved.[Footnote 60]
HUD has estimated that the cost of administering its Housing
Counseling Program will be $18.8 million for fiscal year 2012, with
the majority going toward salaries and benefits. This amount does not
include the grants that HUD makes to some of those agencies. Estimates
for prior years were not readily available, according to HUD, because
until recently the cost of administering the housing counseling
program was not segregated. Because responsibilities for the Housing
Counseling Program are spread across the agency, HUD officials did not
provide an exact number for full-time equivalent staff devoted to
approving and overseeing housing counseling agencies. However, they
estimated that approximately 200 staff members nationwide have
significant responsibilities within the program. Those
responsibilities include collecting and reviewing applications,
processing reapprovals, monitoring approved agencies, and providing
them with education and outreach. HUD staff conduct regular reviews of
approved agencies--which can include conducting onsite visits--to
determine if their performance meets program standards and
requirements or to address risk-related issues. In December 2004, HUD
first published proposed rules that set forth the eligibility
requirements, performance standards, and administrative procedures
required of approved housing counseling agencies. The final rule
became effective in October 2007.[Footnote 61] HUD staff told us that
the initial development of the approval process for housing counseling
agencies was relatively resource-intensive. HUD's handbook for the
program provides guidance to its staff and to program participants,
including the branches, affiliates, or sub-grantees of approved
intermediaries. HUD also recently created standard operating
procedures for staff to follow in conducting performance reviews. The
Dodd-Frank Act established an Office of Housing Counseling within HUD,
but federal budget constraints could delay its establishment and
reduce the scale of HUD's activities.[Footnote 62]
As noted earlier, some financial literacy stakeholders suggested that
if a federal certification process is to be implemented, the financial
education offices of either Treasury or the Consumer Financial
Protection Bureau could be among the appropriate choices to implement
this process. According to a Treasury official, the Office of
Financial Education and Financial Access within Treasury has an
allocation of six full-time equivalent staff for fiscal year 2011. The
level of staff needed to operate a program for certifying financial
literacy providers would clearly depend on the specific scope and
nature of the program, but current staffing levels at Treasury's
financial education office would likely be insufficient to take on
such a responsibility. According to staff at the Consumer Financial
Protection Bureau, its Office of Financial Education was still being
staffed as of May 2011.
Other Considerations:
While viewpoints varied, in general, a majority of the representatives
of nonprofit and private sector financial literacy organizations,
academic experts, and representatives of federal agencies with whom we
spoke believed that the disadvantages of implementing a federal
certification process for financial literacy providers outweighed the
advantages. While such a process would be feasible, many stakeholders
commented that it might not be the most productive use of the scarce
federal resources available for financial literacy. In addition to the
federal resources that would be required, several other challenges,
disadvantages, and other factors were cited:
* There would be administrative costs for the entities being
certified. Representatives of financial literacy organizations and
others noted that applying for and maintaining federal certification
would result in some administrative cost and burden for the
participating organizations. Our review of public comments submitted
in response to the Trustee Program's 2008 proposed rules found that
some participating organizations noted the administrative burden
caused by the requirements for the credit counseling and debtor
education approval process, and one organization noted that it
dedicated more than 100 employee hours each year to complete its
application. The resources needed for administrative requirements such
as these could act as a barrier to participation in any certification
process for certain financial literacy providers--particularly
smaller, community-based organizations.
* Financial literacy providers are highly diverse. Financial literacy
is a wide-ranging field covering many different types of
organizations, topics, and delivery mechanisms. For example, financial
education can be provided in one-on-one counseling, in a classroom
setting, via the Internet, as a set of curricula, or via broadcast or
print media. A single uniform certification process covering financial
literacy providers as a whole may be impractical or inappropriate.
Moreover, the varying nature of providers and programs could require
that certification include multiple processes.
* Whether certification would improve provider quality is unclear.
Several stakeholders with whom we spoke questioned whether a federal
certification process for financial literacy providers would help
distinguish between higher-quality and lower-quality providers. They
also noted that some high-quality providers might not even apply for
certification if the benefit was not clear to them or the
administrative burden appeared significant. Further, one stakeholder
raised concern that the criteria required for financial literacy
providers to be certified would create a "floor" of basic
qualifications rather than actually serve to promote high standards.
As we reported in 2009, there were issues related to counseling
provided by HUD-approved housing counseling agencies for HUD's reverse
mortgage program. We found that HUD's internal controls did not
provide reasonable assurance that counseling providers were complying
with program counseling requirements and, as a result, some
prospective borrowers may not have been receiving the information
needed to make informed decisions about obtaining a reverse mortgage.
[Footnote 63]
* Whether consumers would recognize or use the certification is
unclear. Several stakeholders were skeptical that many consumers would
select a financial literacy provider based on whether or not the
provider had been federally certified. For example, staff at one
federal agency noted that a certification process in and of itself
would not necessarily result in greater consumer confidence in the
advice they receive from certified providers.
* A certification process may not weed out bad actors. One potential
goal of federal certification of financial literacy providers would be
to help weed out unqualified or unscrupulous providers, but how
certification would achieve that goal is not clear.
* Financial literacy certification may not be an appropriate role for
the federal government. Several stakeholders questioned whether
certifying financial literacy providers is an appropriate role for the
federal government. In addition, staff at two federal agencies noted
that the federal government should be prudent about certifying
organizations because the certification could be misrepresented as an
endorsement beyond what certification actually signified--that the
organization met certain prescribed criteria.
* There is a lack of consensus on what is effective in improving
financial literacy. As discussed earlier, the most effective ways of
improving consumer financial literacy are still not fully known.
Several financial literacy experts noted that there is not yet
consensus or consistency within the field on specific standards or
core concepts that financial literacy programs should include. As a
result, certifying financial literacy providers may be premature.
Some representatives of nonprofit and private sector financial
literacy organizations, academic experts, and representatives of
federal agencies with whom we spoke noted that there may be
alternatives to a federal certification process that could still help
achieve some of the same goals. For example, federal agencies could
develop voluntary national standards or continue to promote core
competencies and leading practices, such as those that have been
identified by the Financial Literacy and Education Commission. Another
potential option would be to require financial literacy provider
organizations receiving federal funds to adhere to specific
guidelines, which could address such areas as the information that
organizations provide to consumers. Some stakeholders also noted that
in lieu of a certification process, the federal government might
promote provider competency more directly, such as by offering or
funding additional training or technical assistance.
Agency Comments:
We provided a draft of this report for review and comment to the
Consumer Financial Protection Bureau, Department of Justice, FDIC,
Federal Trade Commission, HUD, Securities and Exchange Commission, and
Treasury. We incorporated technical comments from these agencies as
appropriate. In addition, the Consumer Financial Protection Bureau
provided a written response, which is reprinted in appendix III. The
bureau noted the responsibilities it was given under the Dodd-Frank
Act to promote financial education, with the overarching goal of
improving consumers' ability to make informed choices in the financial
services marketplace. The bureau said it believed that before any
decision to create a federal financial literacy certification program
could be made there would need to be additional exploration of the
program's pros and cons, goals, potential methods, and alternatives.
We are sending copies of this report to the appropriate congressional
committees, Consumer Financial Protection Bureau, Department of
Justice, FDIC, Federal Trade Commission, HUD, Securities and Exchange
Commission, Treasury, and other interested parties. In addition, the
report will be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-8678 or cackleya@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs are on the
last page of this report. GAO staff who made major contributions to
this report are listed in appendix IV.
Signed by:
Alicia Puente Cackley:
Director, Financial Markets and Community Investment:
[End of section]
Appendix I: Scope and Methodology:
Our objectives were to examine (1) what is known about which methods
and strategies are effective for improving financial literacy, and (2)
the feasibility of a process for certifying financial literacy
providers and the benefits and challenges of doing so. For the
purposes of this report, financial literacy providers generally refers
to organizations, rather than individuals, and excludes entities that
provide individualized advice for compensation, such as investment
advisers or financial planners. In addition, our examination of a
potential certification process focused on a process that would be
operated or overseen by the federal government.
To address our first objective, we conducted a literature search to
identify studies, reports, and articles related to the effectiveness
of financial literacy and education efforts. We identified these
documents through a search of ProQuest and ECO databases, which was
augmented with a general Internet search based on key words to link
financial literacy and education with effectiveness. We also asked for
recommendations for papers from academic experts and from
representatives of organizations that we interviewed, and we used the
bibliographies of the studies we reviewed to identify additional
studies. We categorized the identified studies based on their
relevance to our objective and other characteristics. We limited our
search to studies published since 2000 to help ensure that the
material was still relevant. The focus of our search was on documents
that addressed the effectiveness of financial literacy initiatives or
programs and methods of evaluation; we generally excluded from our
search documents that included only broader discussions of financial
literacy or the extent to which consumers are financially literate. In
addition, we reviewed papers that addressed the effectiveness of
strategies for improving consumer behavior that are alternative to
financial education and papers that addressed the application of
behavioral economics to financial literacy and behavior. We limited
our review to published works that were authored by academic
researchers, think tanks, government agencies, or private or nonprofit
organizations that we assessed to have a reasonable degree of
experience or expertise in the field of financial literacy and
education. We performed our searches from September 2010 to May 2011.
In total, we reviewed 142 studies that were identified through this
search. We then screened these studies to identify those that met the
following additional criteria: (1) represented original research (as
opposed to a review of existing research); (2) used empirical
evidence--that is, used data rather than anecdotal information; (3)
evaluated the outcomes of a specific program, approach, or policy; and
(4) were determined by a GAO methodologist to be sufficiently relevant
and methodologically rigorous for inclusion in our report.[Footnote
64] While we attempted to be thorough in our search methods, the 29
studies that met these criteria may not reflect all published studies
that exist and meet these criteria, and do not reflect any studies
that may exist that were unpublished or were not readily accessible.
Of these 29 studies, 12 were published in peer-reviewed journals. In
addition to these studies, we reviewed other studies and papers that
addressed strategies for improving financial literacy that are
separate from financial education (such as changes in retirement
default options) that we deemed sufficiently reliable for our work
because they were published in peer-reviewed academic journals,
written by noted experts in financial literacy, or widely cited in the
field of financial literacy and education.
We also conducted interviews with--and obtained documentation as
applicable from--representatives of federal agencies whose missions
involve consumer education and protection, including the Consumer
Financial Protection Bureau, Federal Deposit Insurance Corporation,
Board of Governors of the Federal Reserve System, Federal Trade
Commission, Department of the Treasury, and Securities and Exchange
Commission; the Financial Industry Regulatory Authority; nonprofit
organizations that provide or advocate for financial literacy and
education, including AARP, American Association of Family & Consumer
Sciences, Consumer Federation of America, Employee Benefit Research
Institute, Institute for Financial Literacy, Jump$tart Coalition for
Personal Financial Literacy, Junior Achievement, National Endowment
for Financial Education, National Foundation for Credit Counseling,
and New America Foundation; one international organization, the
Organization for Economic Co-operation and Development; and one
financial services company, Freddie Mac. In addition, we held
interviews with representatives of the American Bankers Association
and the Credit Union National Association, and we also held group
interviews with representatives of individual community banks and
credit unions that are members of those entities. We also interviewed
six academic researchers who focus on financial literacy.
To address our second objective, we conducted an Internet search for
articles, studies, or position papers related to the feasibility of a
process for certifying financial literacy providers. In addition, we
solicited views on the feasibility of such a process from the
representatives of federal agencies, nonprofit organizations that
educate or represent consumers, financial institutions, and other
organizations cited above, as well as the six academic experts with
whom we spoke. Using a semi-structured interview approach, we gathered
their views on the potential advantages, disadvantages, and challenges
of a certification program, as well as options for how it might be
structured and implemented, which federal entity might be responsible
for it, and how it might be overseen. We also reviewed documentation
from and interviewed representatives of two nonprofit organizations,
the Institute for Financial Literacy and the American Association of
Family & Consumer Sciences, both of which have developed programs for
certifying individuals or organizations that provide financial
education.
In addition, for illustrative purposes, we gathered information on two
existing processes within the federal government for approving
organizations that provide some form of financial education. These
were the processes conducted by (1) the Department of Justice's U.S.
Trustee Program for approving credit counseling agencies and debtor
education providers to meet certain requirements of the Bankruptcy
Code, and (2) the Department of Housing and Urban Development (HUD)
for approving housing counseling agencies under the Housing Counseling
Program. We reviewed relevant documents related to these processes,
including application forms, final and proposed rules, and program
handbooks and guidance. In addition, we requested from the Trustee
Program and HUD their estimated expenditures and staffing levels in
fiscal years 2010 and 2011 related to the approval and oversight of
providers under their respective programs, and data on the number of
providers participating in their credit counseling and debtor
education and housing counseling programs, respectively. We also
obtained information from the Department of the Treasury and the
Consumer Financial Protection Bureau on staffing levels for their
financial education offices. We interviewed agency staff with program
responsibility and discussed their methods for compiling the data, and
we determined that these data were sufficiently reliable for our
reporting purposes. For the Trustee Program, we also used information
that we had collected for a prior report on the costs associated with
their credit counseling and debtor education program during fiscal
years 2005 through 2007.[Footnote 65] We also interviewed
representatives of the Trustee Program and HUD to learn of their
agencies' experiences in developing and implementing their approval
processes, and to gather their views on the benefits and challenges
that might be faced if a federal entity were to undertake an approval
or certification process for a broader class of financial literacy
providers.
We conducted this performance audit from September 2010 to June 2011
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Literature Review of Selected Published Research
Evaluating Financial Literacy Programs:
This appendix includes studies of evaluations of financial literacy
programs that met our criteria for inclusion in our in-depth review of
selected studies. Table 1 provides an overview of the 29 studies,
their authors, type of program covered, program or approach evaluated,
evaluation method, and key findings.
Table 1: Selected Published Research Evaluating Financial Literacy
Programs, 2000-2011:
Study title: Assessing the Effectiveness of Financial Fitness for Life
in Eastern Kentucky;
Author and source: Cynthia L. Harter and John F. R. Harter, Journal of
Applied Economics and Policy 28 (2009): 20-33;
Type of program: Youth classroom;
Program or approach evaluated: Financial Fitness for Life: a personal
finance curriculum divided by grades from K-12 that offers a teacher's
manual, student workbook and parent's guide;
Evaluation method: Pre-and post-test of program participants with
control group comparison;
Findings related to program effectiveness: The curriculum increased
student financial knowledge of economic and financial concepts for all
school levels as determined by a standardized test.
Study title: Education and Saving: The Long-Term Effects of High
School Financial Curriculum Mandates;
Author and source: B. Douglas Bernheim, Daniel M. Garrett, and Dean M.
Maki, Journal of Public Economics 80 (2001): 435-465;
Type of program: Youth classroom;
Program or approach evaluated: High school mandates: state
requirements that mandate the inclusion of financial education in high
school curricula;
Evaluation method: National survey of households;
Findings related to program effectiveness: Adults who graduated high
school after the adoption of a state mandate had significantly higher
rates at which they saved and accumulated wealth during their adult
lives than those who graduated before the mandate.
Study title: Evaluation of the NEFE High School Financial Planning
Program 2003-2004;
Author and source: Sharon M. Danes and Heather Haberman (Denver,
Colo.: National Endowment for Financial Education, 2004);
Type of program: Youth classroom;
Program or approach evaluated: The High School Financial Planning
Program: basic high school financial planning curriculum that
acquaints students with concepts such as financial planning, budget,
saving and investing, credit, and insurance;
Evaluation method: Pre-and post-test of program participants with
follow-up survey 3 months after completion of program;
Findings related to program effectiveness: Three months after
completing the curriculum, students reported improvements in all areas
of financial knowledge, behavior, and confidence, with the exception
of knowledge related to investment issues.
Study title: Financial Management Practices of College Students from
States with Varying Financial Education Mandates;
Author and source: Michael Gutter (Denver, Colo.: National Endowment
for Financial Education, December 2009);
Type of program: Youth classroom;
Program or approach evaluated: High school mandates: state
requirements that mandate the inclusion of financial education in high
school curricula;
Evaluation method: Web survey of college students;
Findings related to program effectiveness: Students from states
without a financial education mandate tend to fare worse on the
majority of financial outcome measures (risk tolerance, knowledge, and
behavior) than do students from states with such mandates. States
whose mandates included required courses and assessment showed the
best results.
Study title: High School Economic Education and Access to Financial
Services;
Author and source: Paul W. Grimes, Kevin E. Rogers and Rebecca
Campbell Smith, Journal of Consumer Affairs 44 (2010): 317-335;
Type of program: Youth classroom;
Program or approach evaluated: General high school course in economics
and business;
Evaluation method: Telephone survey of randomly selected sample of
adults;
Findings related to program effectiveness: Adults who had taken a high
school course in economics and business were more likely to maintain a
bank account later in life.
Study title: JA Finance Park Final Report;
Author and source: Evaluation and Training Institute (Los Angeles,
Calif.: Junior Achievement, May 2008);
Type of program: Youth classroom;
Program or approach evaluated: JA Finance Park: economics education
program for middle school students intended to develop personal money
management skills and knowledge;
The instruction culminates in a day-long hands-on experience where
students assume family and income scenarios;
Evaluation method: Pre-and post-test of program participants;
Findings related to program effectiveness: The program resulted in
statistically significant increases in students' financial knowledge,
ability to develop a personal budget, confidence in their monetary
decisions, and ability to be successful.
Study title: Real Money. Real World: Results of the 2009 Follow-Up
Study;
Author and source: Lisa Sotak Bateson and Theresa Ferrari (Columbus,
Ohio: Ohio State University Extension, July 2009);
Type of program: Youth classroom;
Program or approach evaluated: Real Money. Real World: active, hands-
on role play simulation in which students in grades 6-12 develop and
manage a budget and make lifestyle and budget choices similar to those
of a 25 year-old;
Evaluation method: Post test of program participants with 3-month
follow-up;
Findings related to program effectiveness: Students reported that
after the program their financial behavior had improved, with over 80
percent reporting improvements in timely payment of loans, setting
aside money for the future, and comparing prices.
Study title: Smart Money: The Effect of Education, Cognitive Ability,
and Financial Literacy on Financial Market Participation;
Author and source: Shawn Cole and Gauri Kartini Shastry (Cambridge,
Mass.: Harvard Business School, February 2009);
Type of program: Youth classroom;
Program or approach evaluated: High school mandates: state
requirements that mandate the inclusion of financial education in high
school curricula;
Evaluation method: Census data;
Findings related to program effectiveness: Individuals who attended
school while a state financial education mandate was in effect had, on
average, levels of investment income no different from individuals who
attended school when there was not such a mandate.
Study title: State Curriculum Mandates and Student Knowledge of
Personal Finance;
Author and source: Sharon Tennyson and Chau Nguyen, Journal of
Consumer Affairs 35 (2001): 241-262;
Type of program: Youth classroom;
Program or approach evaluated: High school mandates: state
requirements that mandate the inclusion of financial education in high
school curricula;
Evaluation method: National high school test of personal financial
literacy (Jump$tart);
Findings related to program effectiveness: Students in states that
mandated specific course work in financial education scored
significantly better in financial literacy tests than those in states
without such a mandate.
Study title: Teen Financial Knowledge, Self-Efficacy, and Behavior: A
Gendered View;
Author and source: Sharon M. Danes, and Heather R. Haberman, Journal
of Financial Counseling and Planning 18 (2007): 48-60;
Type of program: Youth classroom;
Program or approach evaluated: The High School Financial Planning
Program: basic high school financial planning curriculum that
acquaints students with concepts such as financial planning, budget,
savings and investing, credit, and insurance;
Evaluation method: Pre-and post-test of program participants;
Findings related to program effectiveness: After studying the
curriculum, females reported improvements in three more financial
behaviors than did males. However, male students reported achieving
their financial goals to a statistically greater level than did female
students.
Study title: The Impact of Personal Finance Education Delivered in
High School and College Courses;
Author and source: Tzu-Chin Martina Peng, Suzanne Bartholomae,
Jonathan J. Fox, and Garrett Cravener, Journal of Family and Economic
Issues 28 (2007): 265-284;
Type of program: Youth classroom;
Program or approach evaluated: General high school and college
financial education courses;
Evaluation method: Online survey of alumni of a midwestern university;
Findings related to program effectiveness: Participation in a college-
level course--but not a high-school level course--with personal
finance content was associated with higher levels of investment
knowledge.
Study title: The Stock Market Game Study: Brief Report;
Author and source: Trisha Hinojosa, Shazia Miller, Andrew Swanlund,
Kelly Hallberg, Megan Brown, and Brenna O'Brien (Chicago, Ill.: FINRA
Investor Education Foundation, July 2009);
Type of program: Youth classroom;
Program or approach evaluated: Stock Market Game: curriculum designed
to teach students the importance of saving and investing, in which
students manage imaginary investments online;
Evaluation method: Randomized controlled trial;
Findings related to program effectiveness: Students who played the
game significantly outperformed students who did not play the game on
both mathematics and investor knowledge tests. A majority of students
also reported that the simulation influenced them to think more about
budgeting and financial planning.
Study title: What Does Financial Literacy Training Teach Us?;
Author and source: Bruce Ian Carlin and David T. Robinson, NBER
Working Paper Series 16271 (2010): 1-33;
Type of program: Youth classroom;
Program or approach evaluated: JA Finance Park: economics education
program for middle school students intended to develop personal money
management skills and knowledge;
The instruction culminates in a day-long hands-on experience where
students assume family and income scenarios;
Evaluation method: Post-course application of materials;
Findings related to program effectiveness: Students who participated
in the financial literacy program made better financial decisions
after the program. The students were also more likely to act on the
advice they received as part of the simulation.
Study title: Money Savvy Kids Memphis Evaluative Report;
Author and source: Eric A. Hagedorn (El Paso, Tx.: Hagedorn Evaluation
Services, January 2007);
Type of program: Youth classroom;
Program or approach evaluated: Money Savvy Kids: elementary school
curriculum that teaches students about saving, spending, investing,
and donating;
Evaluation method: Pre-and post-test of program participants;
Findings related to program effectiveness: The program was effective
in positively affecting students' attitudes and knowledge about
spending, saving and investing money. The students improved on all but
1 of the 10 measured items, with 5 of the improvements significant.
Study title: Financial Education, Financial Knowledge and Risky Credit
Behavior of College Students;
Author and source: Jing Jian Xiao, Joyce Serido and Soyeon Shim (Terre
Haute, Ind.: Networks Financial Institute, November 2010);
Type of program: Youth/young adult classroom;
Program or approach evaluated: General high school and college
financial education courses;
Evaluation method: Survey of 1st-year college students at a university;
Findings related to program effectiveness: Taking personal finance
courses in high school and college did not improve knowledge about
credit issues and was associated with a higher likelihood of engaging
in risky borrowing behavior.
Study title: A Longitudinal Evaluation of the Intermediate-Term Impact
of the Money Smart Financial Education Curriculum upon Consumers'
Behavior and Confidence;
Author and source: FDIC (Washington, D.C.: Federal Deposit Insurance
Corporation, April 2007);
Type of program: Adult classroom;
Program or approach evaluated: Money Smart: financial education
curriculum designed for low-and moderate-income individuals;
Evaluation method: Pre-and post-test of program participants with
follow-up survey 6-12 months after completion of program;
Findings related to program effectiveness: Participants had
significant positive changes in behavior and attitude 6-12 months
after the program. Participants were more likely to open deposit
accounts, save money, use a budget, and have increased confidence in
their financial abilities compared with prior to their participation.
Study title: Does Financial Education Affect Soldiers' Financial
Behavior?;
Author and source: Catherine Bell, Daniel Gorin and Jeanne M. Hogarth
(Terre Haute, Ind.: Networks Financial Institute, August 2009);
Type of program: Adult classroom;
Program or approach evaluated: U.S. Army Personal Financial Management
Training: financial education program for young enlisted soldiers
taught by college instructors which covers topics such as financial
ethics, developing a spending plan, credit, and investing;
Evaluation method: Comparison group survey with follow-up 6 months
after the program;
Findings related to program effectiveness: When controlling for
multiple factors, the study found that the course did not have an
impact on most financial behaviors, with two exceptions. Soldiers who
took the course were (1) more likely than the comparison group to
report using informal spending plans and less likely to report using
formal spending plans, and (2) were more likely to know the difference
between discretionary and non-discretionary spending.
Study title: Employer-Provided Retirement Planning Programs;
Author and source: Robert L. Clark, Melinda Sandler Morrill, and
Steven G. Allen (paper presented at the Annual Conference of the
Pension Research Council, University of Pennsylvania, April 2009);
Type of program: Adult classroom;
Program or approach evaluated: Employer-provided retirement seminar;
Evaluation method: Pre-and post-test of program participants at five
companies;
Findings related to program effectiveness: Participants demonstrated
substantial increases in knowledge and confidence and later reported
certain changes in their decision making, such as altering their
expected retirement age.
Study title: Financial Knowledge of the Low-Income Population: Effects
of a Financial Education Program;
Author and source: Min Zhan, Steven G. Anderson, and Jeff Scott,
Journal of Sociology and Social Welfare 53 (2006): 53-74;
Type of program: Adult classroom;
Program or approach evaluated: Financial Links for Low-Income People:
basic financial management training to persons earning less than 200
percent of the poverty level;
Evaluation method: Pre-and post-test of program participants;
Findings related to program effectiveness: The financial training
improved knowledge levels in all subject areas, although knowledge
gains differed significantly based on certain participant
characteristics, such as marital status and English proficiency.
Study title: Force or Free Will? A Comparative Analysis of Mandatory
Versus Voluntary Debtor Education;
Author and source: Pamela P. Stokes and Adolfo Benavides, Journal of
Legal, Ethical and Regulatory Issues 7 (2004): 73-85;
Type of program: Adult classroom;
Program or approach evaluated: Money management courses for debtors
who filed for bankruptcy under Chapter 13;
Evaluation method: Survey of program participants who attended a
debtor education class over varying time frames;
Findings related to program effectiveness: Debtor education classes
improved the short-term and long-term financial management skills and
behaviors of participants. Both mandatory and voluntary attendees
benefited from the classes, although voluntary attendees reported the
greatest benefit.
Study title: Saving and the Effectiveness of Financial Education;
Author and source: Annamaria Lusardi (Hanover, N.H.: Dartmouth
College, January 2004);
Type of program: Adult classroom;
Program or approach evaluated: Employer-based retirement seminars;
Evaluation method: National survey of households born between 1931 and
1941;
Findings related to program effectiveness: Individuals who attended an
employer-based retirement seminar increased their financial wealth by
almost 20 percent compared to those who did not attend a seminar.
Study title: Saving Performance in the American Dream Demonstration: A
National Demonstration of Individual Development Accounts (Final
Report);
Author and source: Mark Schreiner, Margaret Clancy, and Michael
Sherraden (St. Louis, Mo.: Washington University, October 2002);
Type of program: Adult classroom;
Program or approach evaluated: Individual Development Accounts'
financial education component;
These accounts are designed to improve access to savings institutions
for low-income individuals by matching deposits made for certain
purposes. Participants also receive financial education;
Evaluation method: Survey of participants and a control group 18 and
42 months after program start;
Findings related to program effectiveness: The number of hours of
general financial education received correlated with the amount that
participants saved, although more than 8 to 10 hours had no additional
effect.
Study title: The Effects of Financial Education in the Workplace:
Evidence from a Survey of Households;
Author and source: B. Douglas Bernheim and Daniel M. Garrett, Journal
of Public Economics 87 (2003): 1487-1519;
Type of program: Adult classroom;
Program or approach evaluated: Employer-based financial education;
Evaluation method: National telephone survey of respondents between 30
and 48 years old;
Findings related to program effectiveness: Employees who attended
employer-based financial education were more likely to participate in
401(k) plans and increased the amount they saved for retirement.
Study title: The Effects of Financial Education on the Financial
Knowledge of High School Students;
Author and source: William B. Walstad, Ken Rebeck, and Richard A.
MacDonald, Journal of Consumer Affairs 44 (2010): 336-357;
Type of program: DVD-based youth curriculum;
Program or approach evaluated: Financing Your Future: high school
personal finance program delivered through a video that covers
concepts such as saving, banking, credit, and budgeting;
Evaluation method: Pre-and post-test of program participants with
control group comparison;
Findings related to program effectiveness: Students who participated
in the program showed a much larger gain in financial knowledge than
the control group, increasing their scores on 29 of the 30 measured
items, as compared to 1 for the control group.
Study title: Using a Financial Education Curriculum for Teens;
Author and source: Karen P. Varcoe, Allen Martin, Zana Devitto, and
Charles Go, Financial Counseling and Planning 16 (2005): 63-71;
Type of program: Newsletter-based youth curriculum;
Program or approach evaluated: Money Talks: series of four newsletters
geared toward high school students aged 13-18 years, which cover
topics including saving habits, shopping tips, car costs, and money
values;
Evaluation method: Pre-and post-test of program participants;
Findings related to program effectiveness: The curriculum had a
positive impact on the participants' knowledge and behavior, such as
improved saving behavior and shopping decisions.
Study title: The Impact of Credit Counseling on Subsequent Borrower
Behavior;
Author and source: Gregory Elliehausen, E. Christopher Lundquist, and
Michael E. Staten, Journal of Consumer Affairs 41 (2007):1-28;
Type of program: Counseling;
Program or approach evaluated: Credit counseling: personalized advice
and assistance to consumers who are typically deeply in debt;
Evaluation method: Control group comparison over 3 years from the
initial session;
Findings related to program effectiveness: Borrowers who received
credit counseling improved their credit profile and performance over
the subsequent 3 years, compared with borrowers with similar initial
credit profiles who did not receive counseling.
Study title: Starting a New Chapter: The Role of Credit Counseling in
Helping Debtors Recover from Bankruptcy;
Author and source: Angela C. Lyons, Shawn Howard, and Eric Scherpf
(Terre Haute, Ind.: Networks Financial Institute, November 2010);
Type of program: Counseling;
Program or approach evaluated: Credit counseling required to file for
bankruptcy;
Evaluation method: Pre-and post-test of program participants;
Findings related to program effectiveness: Participants significantly
improved their performance on a knowledge-based test, felt more
knowledgeable about the bankruptcy process and the options available
to deal with their financial problems, and felt that their overall
ability to manage their finances had improved.
Study title: A Little Knowledge Is a Good Thing: Empirical Evidence of
the Effectiveness of Pre-Purchase Homeownership Counseling;
Author and source: Abdighani Hirad and Peter M. Zorn (Cambridge,
Mass.: Joint Center for Housing Studies, Harvard University, August
2001);
Type of program: Counseling;
Program or approach evaluated: Affordable Gold: loan program targeted
for borrowers who earn 100 percent or less of area median income;
Freddie Mac required that at least one qualifying borrower receive pre-
purchase homeownership counseling;
Evaluation method: Control group comparison of loan participants over
at least 18 months from loan origination;
Findings related to program effectiveness: Borrowers who received pre-
purchase counseling were, on average, 13 percent less likely to become
60-day delinquent during the study period. In addition, those who
received individual counseling were half as likely to become
delinquent as those that received their counseling in a classroom.
Study title: Is Technology-Enhanced Credit Counseling as Effective as
In-Person Delivery?;
Author and source: John M. Barron and Michael E. Staten (Philadelphia,
Pa.: Federal Reserve Bank of Philadelphia, February 2011);
Type of program: Counseling;
Program or approach evaluated: Credit counseling: personalized advice
and assistance to consumers who are typically deeply in debt;
Evaluation method: Credit report comparison 1 year prior to, at the
time of, and 2 and 4 years after the initial counseling;
Findings related to program effectiveness: Credit counseling offered
via the telephone or Internet resulted in outcomes no worse-and in
some cases better-than counseling offered face-to-face.
Source: GAO.
[End of table]
[End of section]
Appendix III: Comments from the Consumer Financial Protection Bureau:
Department of the Treasury:
Washington, DC 20220:
June 13, 2011:
Ms. Alicia Puente Cackley:
Director, Financial Markets and Community Investment:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, D.C. 20548:
Dear Ms. Cackley:
Thank you for the opportunity to comment on the GAO's draft report
titled Financial Literacy: A Federal Certification Process for
Providers Would Pose Challenges.
The Consumer Financial Protection Bureau (CFPB) welcomes this report
and commends the GAO for its comprehensive review of the studies
evaluating the effectiveness of financial literacy programs. Financial
education is one of the responsibilities of the CFPB under the Dodd-
Frank Wall Street Reform and Consumer Protection Act. The statute
directs the CFPB to establish an Office of Financial Education to
develop and implement initiatives to educate and empower consumers to
make better informed financial decisions. Other offices established
under the statute, including the Office of Servicemember Affairs, the
Office of Fair Lending and Equal Opportunity, and the Office of
Financial Protection for Older Americans, are also tasked with
advancing financial education. The overarching goal of this work will
be to improve the ability of consumers to make informed choices in the
financial services marketplace.
As the report points out, there are many programs and strategies to
improve consumers' financial decision making. The CFPB agrees with the
report's characterization of financial literacy as the "ability to use
knowledge and skills to manage financial resources effectively" for a
lifetime of financial well-being. Ensuring that financial literacy
programs improve financial outcomes for individuals and families is a
challenging task. The report raises important considerations about
how a certification process could potentially affect the quality and
supply of effective providers of financial literacy programs.
GAO identifies both benefits and significant challenges to developing
a federal financial literacy certification process. We believe
additional exploration of the pros and cons of a certification
process, the goals of a certification, potential methods of
certification, and alternatives to certification would be needed
before any decision to create a federal certification program could be
made.
The CFPB will be coordinating our financial education and financial
capability efforts with those of other federal agencies as we work
toward the shared goal of improving the overall financial literacy of
consumers. This report is timely and helpful to this effort.
Thank you for your work on this important issue.
Sincerely yours,
Signed by:
Gail Hillebrand:
Associate Director:
Consumer Education and Engagement:
Consumer Financial Protection Bureau:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Alicia Puente Cackley (202) 512-8678 or cackleya@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Jason Bromberg (Assistant
Director), Bernice Benta, Tania Calhoun, Daniel Newman, Jennifer
Schwartz, Andrew Stavisky, and Seyda Wentworth made key contributions
to this report.
[End of section]
Footnotes:
[1] Pub. L. No. 111-203, Title X, § 1013(d)(7), 124 Stat. 1376, 1966
(2010).
[2] Harris Interactive Inc., prepared for The National Foundation for
Credit Counseling, "The 2010 Consumer Financial Literacy Survey Final
Report" (April 2010).
[3] FINRA Investor Education Foundation, "Financial Capability in the
United States, Initial Report of Research Findings from the 2009
National Survey, A Component of the National Financial Capability
Study" (New York, N.Y.: Dec. 1, 2009).
[4] Council for Economic Education, Survey of the States: Economic,
Personal Finance & Entrepreneurship Education in Our Nation's Schools
in 2009 (New York, N.Y.: Council for Economic Education, 2009).
[5] Pub. L. No. 108-159, Title V, 117 Stat. 2003 (2003) (codified at
20 U.S.C. §§ 9701-08).
[6] Pub. L. No. 111-203, Title X, § 1013(d), 124 Stat. 1376, 1966
(2010). The Secretary of the Treasury has designated July 21, 2011, as
the date the Consumer Financial Protection Bureau will begin
exercising its new authorities. 75 Fed. Reg. 57252 (Sept. 20, 2010).
[7] The Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 amended the federal bankruptcy code to require (1) individuals to
receive budget and credit counseling from an approved provider before
filing a petition in bankruptcy and (2) bankruptcy petitioners to
complete an instructional course on personal financial management in
order to have their debts discharged. Pub. L. No. 109-8, § 106, 119
Stat. 23, 37-42 (2005) (amending various sections of Title 11). For
the purposes of this report, hereafter we refer to the prefiling
budget and counseling requirement as the credit counseling requirement
and the predischarge personal financial management course as the
debtor education requirement.
[8] For the purposes of this report, we are counting two related
papers that examined the American Dream Demonstration Project--in an
interim and final report--as a single study.
[9] Of the 29 studies, 12 were published in peer-reviewed journals.
[10] Angela C. Lyons, Lance Palmer, Koralalage S. U. Jayaratne, and
Erik Scherpf, "Are We Making the Grade? A National Overview of
Financial Education and Program Evaluation," The Journal of Consumer
Affairs 40 (2006): 208-35.
[11] Jane Schuchardt, Sherman D. Hanna, Tahira K. Hira, Angela C.
Lyons, Lance Palmer, and Jing Jian Xiao, "Financial Literacy and
Education Research Priorities," Journal of Financial Counseling and
Planning 20 (2009): 84-95. The National Research Symposium on
Financial Literacy and Education was convened by Treasury and the U.S.
Department of Agriculture's Cooperative State Research, Education, and
Extension Service on October 6-7, 2008. The symposium reviewed
existing research findings, identified gaps in the literature, and
defined and prioritized questions for future analysis.
[12] Sharon M. Danes and Heather Haberman, Evaluation of the NEFE High
School Financial Planning Program 2003-2004 (Denver, Colo.: National
Endowment for Financial Education, 2004).
[13] Evaluation and Training Institute, JA Finance Park Final Report
(Los Angeles, Calif.: Junior Achievement, May 2008).
[14] Tzu-Chin Martina Peng, Suzanne Bartholomae, Jonathan J. Fox, and
Garrett Cravener, "The Impact of Personal Finance Education Delivered
in High School and College Courses," Journal of Family and Economic
Issues 28 (2007): 265-284.
[15] B. Douglas Bernheim, Daniel M. Garrett, and Dean M. Maki,
"Education and Saving: The Long-Term Effects of High School Financial
Curriculum Mandates," Journal of Public Economics 80 (2001): 435-465;
Shawn Cole and Gauri Kartini Shastry, Smart Money: The Effect of
Education Cognitive Ability and Financial Literacy on Financial Market
Participation (Cambridge, Mass.: Harvard Business School, February
2009); Michael Gutter, Financial Management Practices of College
Students from States with Varying Financial Education Mandates
(Denver, Colo.: National Endowment for Financial Education, December
2009); and Sharon Tennyson and Chau Nguyen, "State Curriculum Mandates
and Student Knowledge of Personal Finance," Journal of Consumer
Affairs 35 (2001): 241-262.
[16] Council for Economic Education, 2009. The 13 states that required
students to take a personal finance course as a high school graduation
requirement as of 2009 were Arkansas, Georgia, Idaho, Illinois,
Louisiana, Maryland, New Jersey, New York, Oklahoma, South Dakota,
Tennessee, Utah, and Virginia.
[17] Bernheim, 2001; Gutter, 2009; and Tennyson, 2001.
[18] Bernheim, 2001.
[19] Cole, 2009.
[20] FDIC, A Longitudinal Evaluation of the Intermediate-Term Impact
of the Money Smart Financial Education Curriculum upon Consumers'
Behavior and Confidence (Washington, D.C.: Federal Deposit Insurance
Corporation, April 2007).
[21] The authors controlled for the following additional factors:
years in the military, pay grade, gender, education, race/ethnicity,
marital status, pre-military experiences, and possession of a credit
card. Catherine Bell, Daniel Gorin, and Jeanne M. Hogarth, Does
Financial Education Affect Soldiers' Financial Behavior? (Terre Haute,
Ind.: Networks Financial Institute, August 2009).
[22] John M. Barron and Michael E. Staten, Is Technology-Enhanced
Credit Counseling as Effective as In-Person Delivery? (Philadelphia,
Pa.: Federal Reserve Bank of Philadelphia, February 2011).
[23] Abdighani Hirad and Peter M. Zorn, A Little Knowledge Is a Good
Thing: Empirical Evidence of the Effectiveness of Pre-Purchase
Homeownership Counseling (Cambridge, Mass.: Joint Center for Housing
Studies, Harvard University, August 2001).
[24] Lois A. Vitt, Gwen M. Reichback, Jamie L. Kent, and Jurg K.
Siegenthaler, Goodbye to Complacency: Financial Education in the U.S.
2000-2005 (Washington, D.C.: AARP, 2005).
[25] New America Foundation, The Effectiveness of Youth Financial
Education: Summary of a Convening Held July 15-16, 2008 (Washington,
D.C.: December 2008).
[26] [hyperlink, http://www.treasury.gov/press-center/press-
releases/Pages/js1111.aspx].
[27] Organization for Economic Cooperation and Development, OECD
Recommendation on Principles and Good Practices for Financial
Education and Awareness (Paris, France: Nov. 4, 2005). The
Organization for Economic Cooperation and Development is a forum of 34
member countries whose mission is to promote policies that will
improve the economic and social well-being of people around the world.
[28] [hyperlink, http://www.jumpstart.org/assets/files/2010_J$-
BestPracticesMaterials.pdf].
[29] GAO, Highlights of a GAO Forum: The Federal Government's Role in
Improving Financial Literacy, [hyperlink,
http://www.gao.gov/products/GAO-05-93SP] (Washington, D.C.: Nov. 15,
2004).
[30] Annamaria Lusardi, Robert L. Clark, Jonathan Fox, John Grable,
and Ed Taylor, Promising Learning Strategies, Interventions, and
Delivery Methods in Financial Literacy Education (Denver, Colo.:
National Endowment for Financial Education, 2010).
[31] Barron, 2011.
[32] GAO, Consumer Finance: Factors Affecting the Financial Literacy
of Individuals with Limited English Proficiency, [hyperlink,
http://www.gao.gov/products/GAO-10-518] (Washington, D.C.: May 21,
2010).
[33] Lutheran Immigration and Refugee Service, "Financial Literacy for
Newcomers: Weaving Immigrant Needs into Financial Education"
(Baltimore, Md.: Mar. 27, 2006).
[34] GAO, Teacher Quality: Sustained Coordination among Key Federal
Education Programs Could Enhance State Efforts to Improve Teacher
Quality, [hyperlink, http://www.gao.gov/products/GAO-09-593]
(Washington, D.C.: July 6, 2009).
[35] Wendy L. Way and Karen Holden, Teacher's Background & Capacity to
Teach Personal Finance (Denver, Colo.: National Endowment for
Financial Education, March 2009).
[36] GAO, Retirement Savings: Automatic Enrollment Shows Promise for
Some Workers, but Proposals to Broaden Retirement Savings for Other
Workers Could Face Challenges, [hyperlink,
http://www.gao.gov/products/GAO-10-31] (Washington, D.C.: Oct. 23,
2009).
[37] Brigitte C. Madrian and Dennis F. Shea, "The Power of Suggestion:
Inertia in 401(k) Participation and Savings Behavior," The Quarterly
Journal of Economics 116 (2001): 1149-1187.
[38] Richard H. Thaler and Shlomo Benartzi, "Save More Tomorrow: Using
Behavioral Economics to Increase Employee Savings," The Journal of
Political Economy 112 (2004): S164-S187.
[39] Automatic reminders can also act like commitment mechanisms and
help people stick to plans. For example, experiments with randomly
selected new bank account holders showed that those who received a
monthly reminder about saving via text message or letter saved 6
percent more than those who did not and were 3 percent more likely to
achieve their targeted amount. Also, reminders that highlighted
clients' goals were two times more effective than reminders that did
not mention the goal. See Dean Karlan, Margaret McConnell, Sendhil
Mullainathan, and Jonathan Zinman, "Getting to the Top of Mind: How
Reminders Increase Saving," NBER Working Paper 16205, July 2010.
[40] See, for example, Congressional Research Service, Retirement Plan
Participation and Contributions: Trends from 1998 to 2006, RL33116
(Washington, D.C.: Jan. 30, 2009).
[41] Esther Duflo, William Gale, Jeffrey Liebman, Peter Orszag, and
Emmanuel Saez, "Saving Incentives for Low-and Middle-Income Families:
Evidence from a Field Experiment with H&R Block," The Quarterly
Journal of Economics (November 2006): 1311-1346.
[42] Individual development accounts are specialized savings accounts
that provide lower-income consumers with matching funds when balances
are used for particular purposes, such as buying a home, starting a
business, or paying for education. Individual development accounts
have received support from foundations, private donors, and the
government.
[43] Gregory Mills, William G. Gale, Rhiannon Patterson, Gary V.
Engelhardt, Michael D. Eriksen, and Emil Apostolov, "Effects of
Individual Development Accounts on Asset Purchases and Saving
Behavior: Evidence from a Controlled Experiment," Journal of Public
Economics 92 (2008): 1509-1530.
[44] Michal Grinstein-Weiss, Michael Sherraden, William G. Gale,
William M. Rohe, Mark Schreiner, and Clinton Key, Ten-Year Impacts of
Individual Development Accounts on Homeownership: Evidence from a
Randomized Experiment (Washington, D.C.: Brookings Institute: Mar. 4,
2011).
[45] Julie Agnew and Lisa R. Szykman, Asset Allocation and Information
Overload: The Influence of Information Display, Asset Choice and
Investor Experience (Boston, Mass.: Center for Retirement Research,
Sept. 28, 2004) and Sheena S. Iyengar and Wei Jiang, The Psychological
Costs of Ever Increasing Choice: A Fallback to the Sure Bet (New York,
N.Y.: Columbia University: Apr. 5, 2005).
[46] GAO, Social Security Statements: Social Security Administration
Should Better Evaluate Whether Workers Understand Their Statements,
[hyperlink, http://www.gao.gov/products/GAO-05-192] (Washington, D.C.:
Apr. 1, 2005); GAO, Social Security Administration: Longstanding
Problems in SSA's Letters to the Public Need to Be Fixed, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-00-179] (Washington, D.C.: Sept.
26, 2000); GAO, Credit Cards: Increased Complexity in Rates and Fees
Heightens Need for More Effective Disclosures to Consumers,
[hyperlink, http://www.gao.gov/products/GAO-06-929] (Washington, D.C.:
Sept. 12, 2006); and GAO, SSA Benefit Statements: Well Received by the
Public but Difficult to Comprehend, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-97-19] (Washington, D.C.: Dec. 5,
1996).
[47] Annamaria Lusardi, Punam Anand Keller, and Adam M. Keller, "New
Ways to Make People Save: A Social Marketing Approach" in Overcoming
the Saving Slump: How to Increase the Effectiveness of Financial
Education and Saving Programs, ed. Annamaria Lusardi (Chicago, Ill.:
University of Chicago Press, 2008), 209-236.
[48] Esther Duflo and Emmanuel Saez, "The Role of Information and
Social Interactions in Retirement Plan Decisions: Evidence from a
Randomized Experiment," The Quarterly Journal of Economics, 118
(2003): 815-842.
[49] Annamaria Lusardi, Punam Anand Keller, and Adam Keller,
Increasing the Effectiveness of Retirement Saving Programs for Females
and Low Income Employees: A Marketing Approach (Denver, Colo.:
National Endowment for Financial Education, April 2009).
[50] The Bankruptcy Code, as amended by the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005, describes credit
counseling as "an individual or group briefing (including a briefing
conducted by telephone or on the Internet) that outline[s] the
opportunities for available credit counseling and assist[s] such
individual in performing a related budget analysis." 11 U.S.C. §
109(h)(1). "Debtor education" is described as "an instructional course
concerning personal financial management." 11 U.S.C. § 111(d)(1)(C).
The interim regulations require that the course must be conducted for
a minimum of 2 hours and cover budget development, money management,
wise use of credit, and consumer information. 28 C.F.R. § 58.25(f),
(g).
[51] Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,
§ 106, Pub. L. No. 109-8, 119 Stat. 23, 37-42 (2005) (amending various
sections of Title 11).
[52] City, county, and state governments may participate as housing
counseling agencies in HUD's program but do not require approval.
Twenty participating entities were state housing finance agencies and
1,691 were branches and affiliates of approved intermediary
organizations. HUD approves national and regional intermediaries that
have a network of providers.
[53] In addition, the Institute for Financial Literacy certifies
individuals to provide financial counseling, education, and related
services.
[54] GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, [hyperlink,
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: June 1,
1996).
[55] NeighborWorks America is an organization chartered by Congress in
1978 as the Neighborhood Reinvestment Corporation. 42 U.S.C. §§ 8101-
8107. The organization began operating as NeighborWorks America in
2005.
[56] Some organizations have already developed model content standards
or core competencies. For example, the Jump$tart Coalition for
Personal Financial Literacy has developed "National Standards in K-12
Personal Finance Education," which delineate the personal finance
knowledge and skills that elementary and secondary students should
possess. The Department of the Treasury has developed a key set of
"core competencies" that define what consumers should know to make
informed decisions about their personal finances.
[57] Application Procedures and Criteria for Approval of Nonprofit
Budget and Credit Counseling Agencies and Approval of Providers of a
Personal Financial Management Instructional Course by United States
Trustees, Executive Office for United States Trustees, Justice, 71
Fed. Reg. 38076 (July 5, 2006).
[58] An exception is the counseling required for borrowers prior to
receiving a Home Equity Conversion Mortgage, for which HUD specifies
the items that must be discussed with the borrower.
[59] We estimated the costs associated with the Trustee Program's
Credit Counseling and Debtor Education Unit in 2008. GAO, Bankruptcy
Reform: Dollar Costs Associated with the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005, GAO-08-697 (Washington, D.C.:
June 27, 2008).
[60] Lengthy rulemaking processes are not unusual. In a review of 16
significant final rules among a number of federal agencies, we found
that the average length of time from initiation to final publication
of a final rule was just over 4 years. GAO, Federal Rulemaking:
Improvements Needed to Monitoring and Evaluation of Rules Development
as Well as to the Transparency of OMB Regulatory Reviews, [hyperlink,
http://www.gao.gov/products/GAO-09-205] (Washington, D.C.: Apr. 20,
2011).
[61] Housing Counseling Program, Department of Housing and Urban
Development, 72 Fed. Reg. 55638 (Sept. 28, 2007) (codified at 24
C.F.R. Part 214).
[62] Pub. L. No. 111-203, Title XIV, Subtitle D, 124 Stat. 1376, 2163
(2010).
[63] GAO, Reverse Mortgages: Product Complexity and Consumer
Protection Issues Underscore Need for Improved Controls over
Counseling for Borrowers, [hyperlink,
http://www.gao.gov/products/GAO-09-606] (Washington, D.C.: June 29,
2009).
[64] Two of the papers looked at the American Dream Demonstration
Project; one paper presented preliminary results and the second was
the final evaluation report. We reviewed both of these papers, but for
reporting purposes have counted them as a single study.
[65] GAO, Bankruptcy Reform: Dollar Costs Associated with the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,
[hyperlink, http://www.gao.gov/products/GAO-08-697] (Washington, D.C.:
June 27, 2008).
[End of section]
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