Last year, our newest federal consumer agency, the Consumer Financial Protection Bureau (CFPB), rolled out an ambitious program designed to elevate the level of financial literacy among consumers. One part of the effort is primarily focused on the most vulnerable, such as those who qualify for free social services or who obtain legal services from a pro bono lawyer through the hundreds of pro bono programs around the country. Because business lawyers often seek pro bono opportunities that are not litigation focused, supporting this effort might appeal to a wide range of transactional attorneys, including readers of The 10-Q.
The CFPB’s effort proceeds from the likely assumption that nearly all consumers – and particularly those who are less fortunate – could benefit from knowing more about household budgeting, cash flow, credit reporting, limits on bill collecting, and a whole array of other financial matters that touch nearly everyone. Education in “financial literacy” is, of course, not new. But it seems quite unlikely that the many sources for financial literacy education actually reach many of those who need it most. Finance is hard, and a subject that sounds boring and inaccessible to many. A person being hounded by creditors, or refused a job on account of a poor credit score, seems unlikely to see even a free course in “financial literacy” to be part of a solution.
The agency’s delivery model for its empowerment education could well be unique and it certainly is to this subject matter. The model puts powerful financial “tools” into the hands of lawyers and other professionals who work with consumers and teach those providers to identify the tool(s) a given client may most need. The provider can then educate the client one-on-one in how to use the tool(s).
Education in “financial literacy” is, of course, not new. But it seems quite unlikely that the many sources for financial literacy education actually reach many of those who need it most.
To give a simple example, one of the “tools” is a form to capture a consumer’s cash flow over time. This allows the consumer to recognize points during the month when she is out of cash so that she can adjust her habits to avoid running short (and therefore having to borrow money, bounce a check, or run into default on a bill). If, when working with a consumer, the service provider recognizes that the client has a “cash flow problem,” she will teach the client how to use one or more of the cash flow budgeting tools and begin to fix the problem.
This different approach has great promise. It is a safe bet that nearly every client of a pro bono or legal services lawyer (whether their primary problem is located in family law, immigration law, criminal law, or credit and business law) will also be experiencing some financial problems that will get worse unless addressed. The innovative idea is that the lawyer will append to the “primary” work that brought in the client a small dose of financial help, thereby giving the client an extra boost. Clients who would not have dreamed of attending a free financial literacy class or of obtaining credit counseling may receive financial education through a tool that can actually improve their financial lives. The toolkit – called “Your Money, Your Goals” – may thus reach people that have been heretofore unreachable and perhaps most in need of tools to handle personal finance.
The entire toolkit is drafted in a “consumer-friendly” way that makes it usable as a consumer self-help manual, even for the providers themselves. If, when working with a client, the provider’s time is short, this enables the provider to point the client to the most promising tools and urge her to learn about them and use them herself. This will, once again, result in stronger client learning because using the tools makes the learning operational and likely to be more resilient.
The agency has embarked on an aggressive training program for lawyers and other professionals and, in the process, is raising their level of financial literacy.
To inquire about training opportunities, empowerment@cfpb.gov. The toolkits, written for different kinds of providers, and training manuals to go with them are freely available at the CFPB’s website, www.consumerfinance.gov/your-money-your-goals/.
We—even business lawyers—can probably all use a little more financial literacy in our personal lives. Whether to elevate one’s own level or to assist others in elevating theirs; downloading and becoming familiar with this resource will be well worth the effort.