Magazine article American Banker

Want to Protect Consumers? Mandate Financial Literacy

Magazine article American Banker

Want to Protect Consumers? Mandate Financial Literacy

Article excerpt

Byline: Robert T. Taylor

In May, the Federal Reserve Board issued a lengthy paper on the economic well-being of U.S. households. Among the findings, the report said, "Forty-six percent of adults say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money."

The study looked at various income groups and the percentage unable to meet this unexpected expense. Perhaps most shocking, the survey found nearly 20% of those making more than $100,000 per year could not cover an unexpected $400 expense.

Such financial insecurity for high wage-earners suggests a lack of priorities when it comes to savings and other aspects of individual financial management. It also suggests that many wage-earners need more and better financial literacy.

A simple two-pronged formula to address financial consumer protection concerns is equipping bankers with an ethical foundation when serving customers, and also equipping bank customers with the knowledge and skills to be savvy consumers of financial products. In a perfect world, these two attributes would make the Consumer Financial Protection Bureau obsolete.

I believe community bankers adhere to very high ethical standards; bankers and bank trade associations must make this a more high profile expression of who we are and what we expect from those who work in banking. We need to have the ability to speak up when one of our own falls short. Earlier this year, I wrote in BankThink about the discovery of an Ethics Code adopted at the 1928 Louisiana Bankers Association convention, which offers a glimpse of how simple and direct ethical expectations can be expressed. We have shared the document with our LBA members.

But bankers can also use their skills to be part of the remedy for subpar financial literacy among consumers. …

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