Teaching Consumers Financial Skills

CRA is all for it, and so is the OCC. The more customers know about managing their finances and using banks the better customers they will be. And some, who have not been customers, will become customers. The OCC has issued an Advisory Letter, AL 2001-1, discussing the needs and opportunities for financial education of consumers. The OCC is particularly concerned about financial education for those who are "on the fringes of the banking system." The guidance includes suggestions for services and programs. OCC has taken the additional step of pointing out how educational programs may meet one or more of the CRA tests.

Also motivating the OCC is the fact that the Federal Reserve Board's 1998 Consumer Survey revealed that the number of check cashing stores is rising and the national savings rate has fallen. The OCC believes that effective consumer education may reverse these trends.

Acquiring assets is the first step of entry into the financial mainstream. Supporting this step clearly has positive implications for both CRA and fair lending. Financial education is also very important in preparing consumers to protect themselves from predatory lending practices.

OCC notes that the education initiatives help consumers and increase the visibility of the institutions in their communities. In short, the contact with consumers can be very effective marketing.

The bank should remember that the benefits to the bank are peripheral to the goal of education and mainstreaming. Benefits to the bank are appropriate, but all education efforts should be designed for clarity, utility, and educational impact. Marketing just happens.

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Topics for financial education are many and varied. They may be as basic as how to use an ATM or more advanced to prepare consumers to purchase a home. At any level, financial education can also be important to your bank's CRA rating. The education programs should be targeted to low- and moderate-income individuals and structured to meet the investment or service tests. Banks may also provide loans to financial literacy programs or organizations that would be a community development loan or investment.

Both the Advisory Letter and a directory of educational programs is available on the OCC's web site at www.occ.treas.gov/cdd/commfoc.htm

Copyright © 2001 Compliance Action. Originally appeared in Compliance Action, Vol. 6, No. 1, 2/01