ICYMI: Bipartisan Lawmakers Join CBA’s Call for CFPB Investment in Consumer Education, Financial Literacy

Lawmakers on both sides of the aisle and in both chambers of Congress this week joined the Consumer Bankers Association’s (CBA) call for the Consumer Financial Protection Bureau (CFPB) to be part of a whole-of-government investment in consumer education initiatives focused on scam identification and prevention.

During CFPB Director Rohit Chopra’s Semi-Annual Report to the Senate Banking Committee, Senator Katie Britt (R-AL) raised concerns about the need for more scam prevention efforts at the Bureau, noting:

“I think we can both agree that or assume that obviously, we need to go after bank robbers. And now in this day and age, thankfully, you know, you don't see as many of those things in actuality, but what we do see is fraud to consumers. So, we're seeing it across our state, we had a number of people targeted through the use of AI and unfortunate scams, so to speak. And so, when I look at your budgetary proposal, when I look at your performance plan, it shows that consumer education initiatives are decreasing at the CFPB. And I want you to help me understand why the CFPB investment and consumer education is not projected to keep pace with the rise and fraud and scams that American consumers are experiencing. I think we have to make sure we're doing our part to make sure that Americans are protected.”

Senator Britt added:

“When I see the decrease in the budgetary items, that concerns me because Alabamians alone lost $55 million last year to scams. So, we need to be making sure we’re doing what we need to be doing to stay in front of that to educate people about what you just said, AI and the use of voiceovers.”

Congressman David Scott (D-GA) and Congresswoman Young Kim (R-CA) during Director Chopra’s Semi-Annual Report to the House Financial Services Committee both asked why unallocated funds in the CFPB’s Civil Penalty Fund – which serves the dual purposes of redressing victims as well as financial literacy and education – have been used to deliver relief to victims of scams, but have not been directed toward protecting consumers from becoming victims in the first place.

Urging the Director to use the tools at his disposal at the CFPB, Rep. Scott said:

“Can this Committee get – because we’re concerned about this – a clear commitment from you today that the CFPB will use a portion of the more than $600 million in unallocated Civil Penalty Funds to support financial literacy, financial education for our consumers? […]Use this money. That’s what it’s there for. […] The priority ought to be stopping [consumers] from becoming victims.”

Similarly, Rep. Kim, who serves as co-chair of the Financial Literacy and Wealth Creation Caucus, asked:

“I’m disappointed that you written testimony did not mention financial literacy or education as one of your priorities. Consumer education is one of six primary functions of the Bureau. It’s essential for consumer protection. […] I would like to urge you to make use of the public-private partnerships to enhance financial literacy. According to the Civil Penalty Fund’s annual report, published November 2022, the total unallocated balance was more than $481 million. And recent enforcement actions may have increased the funds unallocated balance to exceed $2 billion. So, how come you haven’t used the Fund for its intended purpose to enhance financial literacy since you took office as Director of the CFPB?”

She went on to say:

“I also want to echo the urgency of my colleague across the aisle, Mr. Scott, to use the Fund for its intended purposes. And I ask that you, rather than focusing on blog posts and press releases, I would remind you that you have other tools in your toolbox, like that Fund, to prevent fraud and scams. So, please, let’s use more of them.”

Looking Back

In January, CBA called for a whole-of-government response to increasingly prevalent and sophisticated financial scams across peer-to-peer (P2P) payment platforms, specifically urging Director Chopra to work in tandem with banks, which are already on the front lines of these efforts. In fact, a recent surveyconducted by CBA found an overwhelming majority – 8 in 10 Americans (83%) – believe banks are doing a good job helping them avoid scams.

Reinforcing the benefits of consumer education in combatting this type of fraud in a letter to the CFPB, CBA President and CEO Lindsey Johnson wrote:

“Studies have shown consumer education effectively helps identify and combat different types of financial fraud. In fact, according to research from the FINRA Investor Education Foundation and the Center for Economic and Social Research, which examined investment fraud, ‘repeated exposure to concise, online educational interventions’ strengthens consumers’ financial literacy and reduces their susceptibility to fraud. CBA believes consumer education regarding P2P scams will yield similar positive results.”

Specifically, Johnson called on the CFPB to direct unallocated funds in the CFPB’s Civil Penalty Fund toward consumer education initiatives focused on financial scam identification and prevention:

“CBA strongly urges the CFPB to direct unallocated funds in the CFPB’s Civil Penalty Fund toward consumer education initiatives focused on financial scam identification and prevention in accordance with Section 1075.107(a) of the Consumer Civil Penalty Rule (the Rule). These education initiatives will help bolster efforts already underway to teach consumers how to spot scams on P2P payment networks and internet transactions, further preventing consumer harm before it occurs.”

To read the full letter, click HERE.

In November 2022, Johnson outlined in American Banker tangible steps policymakers in Washington could take to support and protect consumers and small businesses amidst ongoing economic uncertainty, including working in tandem with banks and across government agencies to prevent fraud. Championing the need for a whole-of-government approach to combat the rise in scams and prevent consumer harm, she said:

“[Banks are] taking significant steps to actively prevent, detect and mitigate scams. But they cannot do it alone. Congress and regulators must work collaboratively with the industry — in a whole of government approach — to prevent bad actors from harming consumers in the first place.”

To read the op-ed, click HERE.