White House Summit on Financial Capability and Empowerment: Opening Remarks

Richard Cordray: Thank you. I guess I am leading things off.
It is a pleasure to be here and I am going to make just a few
remarks about the Consumer Financial Protection Bureau
and the topic of financial literacy, financial education,
financial capability.
So thank you for having me here today.
Engagement on consumer financial issues is important
to this country.
Let me just say that right at the beginning.
Each one of us whether from the public, private,
or non profit sector should have certain goals in common,
a strong and vibrant financial system,
the ability to earn and maintain the public's trust
and confidence, fidelity to the highest standards of business
ethics, excellent customer service,
and a competitive economy that works for Americans in both the
short-term and in the long-term.
During my years in state and local government,
I became deeply engaged in consumer finance issues.
I saw good people struggling with debts
they could not afford.
Sometimes they made bad decisions they came to regret.
Sometimes an unexpected event like a loved one getting sick
or a family member losing a job overwhelmed even their
most careful planning.
Still other times I saw unscrupulous businesses that
obscured the terms of loans or engaged in outright fraud.
Many people struggle to understand financial matters
which leads them into trouble or makes their problems worse.
At the Consumer Financial Protection Bureau,
we are uniquely positioned to address these issues by helping
to bridge the ever widening gap between people's actual
financial capability and the increasingly complex financial
decisions they have to make.
We are deeply committed to a vision of an America
where everyone is financially educated.
But the challenges that confront us in achieving that goal are
complex, varied, and significant.
To face them, we must start with where all good education
starts with our children.
Education as we think about it builds on work
already done by others.
By previous generations, previous schools of thought,
even previous civilizations.
People learn various things.
It may be a bit of information, or a personal experience,
or a concept.
These things get shared and recorded.
And then they can be passed on to others as building blocks.
These building blocks form a foundation of practical and
theoretical knowledge that becomes more
substantial over time.
What would it be like if every generation had to
learn mathematics from scratch?
Even just the concept of numbers would be baffling enough.
Or imagine if we knew nothing of biology or chemistry and had to
learn them anew every twenty years or so.
I raise this point because in our society financial education
typically seems to be an outlier.
Rather than educating our young people,
we condemn them to making the same mistakes others have made
before them in the so-called school of hard knocks which
means it is no school at all.
When we do not teach children about personal finance,
about managing household budgets or making informed decisions
about larger investments in an education or home,
we force them to learn it largely or perhaps entirely
on their own if at all.
When Congress and the President created the Consumer Financial
Protection Bureau, they made sure to establish the Office
of Financial Education to address these issues.
Of course, the bureau is still in it's infancy and so we'll be
seeking input from the practitioners and the public,
including many experts here today,
about how to improve financial education.
What works and what does not work still seems to be a bit
of an unknown at this point.
We need to figure that out and strategize on how best to
implement effective methods of financial education.
What we do know is that Americans now have some of the
highest personal debt levels in the history of our country.
We know that too many Americans live beyond their means.
We know that young Americans are less likely to be financially
capable than older Americans.
We know two out of three households have no rainy day
fund for unexpected setbacks.
We also know that the people in this room are actively trying to
tackle these issues in your communities,
and we look forward to hearing from you.
We envision a world where people understand budgets, savings,
investments, and credit.
We want to see integrated curricula in our schools.
Where the benefits of compound interest are
understood in math class.
Where economic costs and risks are taught in social
studies class.
Where an essay in English class explains how we can take control
of our financial lives to achieve our goals.
We all need to know why we have bank accounts,
why we keep track of checking account balances,
why we should check our credit reports regularly.
I was at a jump start dinner recently and was talking to
Ted Beck at the event.
And he said that he had older text books that used
to integrate financial lessons into the curriculum in a much
more standard way.
I said I would like to see those text books and he sent
me several.
These are mathematics text books from the era of World War I.
So this book was published in 1929.
It is called Hamilton's Essentials Of Arithmetic
for Middle Grades.
So I started going through it and I started marking the pages
where there were lessons that were described about arithmetic
in terms of financial issues.
Buying and selling something.
Making money and how much you would save.
There are units here on United States money.
Units here on making change.
Units here on keeping a cash account.
The attitude expressed in this book is you are going to learn
mathematics, but along the way you are going to learn a lot
about how to manage your affairs, how to manage money,
how to manage finances.
I got through about page 60 in the interest of shortness of
time and the brevity of life.
I marked the pages.
(laughter)
I marked the pages between page one and page 60 where there were
financial matters alluded to.
And you can see that it is littered with it.
That is what we used to teach.
We need to do that again.
Above all, people need to know that there are a few big moments
in lives where they will confront specific decisions
with potentially massive consequences,
such as taking out a mortgage or a student loan.
Do you go to school here or there?
Do you buy this house or that one?
How much debt do you take on?
Do you understand the consequences?
At what age do you start saving for retirement?
These crucial decisions have huge ripple effects on your life
lasting for years.
There are significant occasions like these where you can make a
terrible decision in the moment by focusing on the wrong things
or failing to gather enough information.
At a minimum, people need to understand which decisions are
the most important ones, not to treat them casually and to get
help when they need it.
To provide consumers with more of the information they need to
make sound financial decisions, we recently launched Ask CFPB as
an interactive user friendly database of questions frequently
asked by consumers.
We enlisted experts at the bureau to answer these questions
in plain language.
Not always easy for experts to do.
We want consumers to have a trusted place to go for clear
unbiased information.
Many questions so far are focused on credit
cards and mortgages.
And we have specific sections for service members, students,
and older Americans.
Come and tell us what else we should be covering at
www.ConsumerFinance.gov.
Our political order is consciously organized around
a free market economy based on individual decision making and
personal responsibility.
In this society, being an effective citizen is about much
more than knowing how to vote or that the government
has three branches.
It is also about being able to acquire the know how and the
capacity to manage your affairs and make the most
of your opportunities.
There are two ways to close the gap between the actual financial
capability of consumers and the increasingly complex set
of financial decisions they must be able to make.
One way is to better inform consumers and
better educate consumers.
Another way is to bring more transparency and accountability
to the financial markets.
If we can bring financial decisions down to the level
where they are more accessible, by making choices clearer and
simpler than we close the gap.
You should not need a law degree to read a bank or credit card
account or contract.
We are advocating for greater transparency in the financial
markets not to dumb things down, but to take overly complicated
products and make them reasonably accessible to
normal human beings.
At the Consumer Bureau we are doing this with our signature,
Know Before You Owe Mortgages Project to simplify and
streamline the application forms and closing documents
for mortgages.
We are also showing how this can be done with our sample
credit card agreement.
On student loans, we first produced a sample financial
aid shopping sheet for students and then followed up with our
financial aid comparison shopper,
an on line tool that can be used to estimate the cost of higher
education by measuring schools side by side.
By the way, we have had a terrific working relationship
with the Department Of Education and the Secretary on that and we
greatly appreciate that.
Each of these tools provides greater transparency,
assists with comparison shopping,
and eases decision making for consumers.
We also understand sometimes people need special help,
so we have established a complaint system on our
website and through a hotline.
Consumers can send us complaints about your mortgage,
credit card, bank account, and the like.
Our consumer response specialist will follow up on these concerns
and seek to get them resolved.
Again that is ConsumerFinance.gov.
Our goal is to give the people the confidence and peace of mind
that the financial world is not booby trapped with pitfalls that
will ruin their lives.
We want information to be more accessible to people,
and through the enhanced -- through this enhance consumers
abilities to make wise financial decisions for themselves and
their families.
By bringing these results closer together,
we will bolster financial capability in this country.
By working with all of you we are glad to share these
convictions and to join you in this worthy cause.
Thank you very much.
(applause)