RSSThe Consumer Financial Protection Bureau has announced a new program entitled the Financial Coaching Initiative. The program is designed to provide financial counseling to consumers who are “economically vulnerable,” including members of the armed services who are transitioning back to civilian life after leaving active duty. The CFPB announcement can be found here.
The program places 60 certified financial coaches at organizations around the country to provide in-person, individualized educational services to help those who are “under-served” and “economically vulnerable.” The effort is intended to help is customers make good financial decisions and reach their financial goals. The organizations have not been named, nor have the 60 locations, but all coaches and organizations were chosen by the CFPB. The coaches hired for the program have experience working with the populations they will serve, are trained in financial coaching techniques, and will be accredited by the Association for Financial Counseling and Planning Education, according to the bureau.
The CFPB cited millions of consumers who are considered economically vulnerable, including the 49.1 million people living below the poverty line, and the more than 68 million who are “financially under-served” (although that term is not defined). The CFPB said these consumers are the most likely to lack access to traditional financial services, including products that are more appropriate to their needs and less costly. Specifically, the CFPB mentioned that around 250,000 service members re-enter civilian life after active duty and find the financial transition to be particularly challenging. The Department of Defense offers a Transition Assistance Program (TAP), but many transitioning service members lack experience in money management, and find after they leave the service that they may need help in reworking the financial plan they made while in TAP.
Significantly, the Financial Coaching Initiative is the first program ever launched by the CFPB that is funded by Civil Penalty Fund. Civil penalties paid to the CFPB after an enforcement action are typically paid to the alleged victims of misconduct. Dozens of such penalties have been levied in recent years. However, when it cannot locate the victims or finds it is “not practicable to pay them,” Dodd-Frank allows the bureau to put those funds toward consumer education and financial literacy programs. Although the Civil Penalty Fund has existed since the inception of the bureau, it has never before been used to fund a program. In fact, it was 2013 before the CFPB even issued final rules for how that would be done. By November of that year, an audit by the Office of the Inspector General found the Fund had a balance of $63.5 million.
