AFSPA's 'Consumer Financial Education Newsletter'

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It is never too late to start early: The case for ongoing financial education

Financial literacy is often presented as a skill best learned young, like riding a bike or memorizing multiplication tables. While it’s true that early exposure to financial concepts can set children on a path to lifelong financial health, this approach unintentionally sends a problematic message: If you didn’t learn about finance as a child, you’ve missed the boat.

We’ve all heard it before—maybe even said it ourselves: “Where was this when I was younger?” The underlying sentiment is clear: I wish I had learned this earlier because now it’s too late for me. But this couldn’t be further from the truth. Financial education isn’t a one-and-done lesson; it’s a lifelong process, and arguably, the most relevant time to learn is when the lessons are applicable to your life.

Why learning later still matters

Life’s milestones—whether buying a home, starting a business, or planning for retirement—are the moments when financial literacy is truly put to the test. Yet, these are often points in life when people feel unequipped and overwhelmed. The good news is that these very challenges can also be the catalyst for learning.

Read more at CU INSIGHT

Could Municipal IDs Facilitate Access to Financial Services?

Of the approximately 5.6 million U.S. households that did not have a bank or credit union account in 2023, about 13 percent cited not having the identification (ID) required to open an account as a reason for being unbanked. Municipal ID programs provide a form of local identification and can be designed to facilitate access to banking and financial services, though challenges to achieving this potential remain.

In 2023, nearly 730,000 unbanked U.S. households cited the lack of necessary personal identification (ID) required to open a financial account as a reason for being unbanked—an increase from more than 680,000 in 2021 (FDIC 2024). Although this share of unbanked households (13 percent) is small compared with the shares that cited other reasons (such as not enough money to meet minimum balance requirements, privacy concerns, or lack of trust), access to an accepted ID may be a more resolvable concern.

A growing number of cities and counties have begun to offer municipal ID cards, which allow community members to access services within their municipality. In addition, a municipal ID may facilitate access to banking and financial services for unbanked households that lack a federal or state-issued ID. This Payments System Research Briefing provides an overview of municipal ID programs, discusses how municipal IDs may help facilitate access to financial services, and reviews what challenges remain to increasing financial account access through municipal IDs.

Read more at Federal Reserve Bank of Kansas City

Have a tax law question?

Our #IRS Interactive Tax Assistant has answers.

Watch this short video to learn more:

https://youtu.be/y6HkaBkdKdU

IRS warns of holiday scams

• Avoiding clicking on unknown links in emails or texts.
• Verifying the source of any unexpected messages.
• Using strong, unique passwords for your accounts.

IR-2024-300: IRS warns of holiday scams, encourages protecting sensitive personal information as 9th annual National Tax Security Awareness Week starts

Jose L. Santiago

Public Affairs Specialist

Tax Outreach, Partnership and Education

Email: jose.l.santiago@irs.gov

76% of Americans Report Emotional Stress From Finances During the Holiday Season

A survey of 2,000 Americans by Talker Research commissioned by Beyond Finance found that most of the Americans are financially stressed during the holiday season. 56% of the respondents said that they feel pressured to spend money on gifts during the holidays. When asked where they feel the most pressure to spend money on, 71% answered family, 28% said friends and 19% said because of social media. 76% reported experiencing “Money Wounds” that is emotional stress from financial challenges.

26% suffer from low self esteem because of financial stress, 21% feel money wounds because of their habit to spend a lot on useless things. During the holiday season 25% respondents reported experiencing money wounds because of compulsive overspending. The survey also asked why respondents are experiencing financial stress and reasons were financial mistakes (40%), being in debt (25%) and not making enough money at all (34%).

Read more at Digital Information World

71% of financial advice posted on social media is misleading

Gen Z and millennials are particularly susceptible to social media financial advice, which is why employers should host financial literacy workshops, webinars, or provide regular communications that raise awareness about the risks of unverified financial advice.

In light of a Forbes Survey showing that nearly 80% of young adults now turn to social media platforms for financial advice, Social Capital Markets, a blockchain technology hub, set out to investigate the credibility of the advice circulating on these platforms.

“While platforms like TikTok and Instagram are often associated with viral dance trends and influencer updates, many young people, particularly those between 18 and 41, are using them for something far more severe—investment advice,” according to Sudhir Khatwani, Founder and Head of Research at Social Capital Markets.

Read more at BenefitsPro

Consumer Credit Cards Show Few Signs of Financial Stress: FDIC

Since monetary policy tightening began in March 2022, interest rates have risen across a range of consumer financial products, including credit cards. However, the consumer credit market shows little sign of financial stress as of September 2024. While credit card delinquency rates have increased among subprime borrowers, internal bank assessments suggest that subprime default risks remain historically low.

The Federal Reserve began tightening monetary policy in March 2022 to combat higher inflation. This tightening, in turn, increased borrowing costs for a wide range of consumer financial products such as auto loans, mortgages, and credit cards. Higher borrowing costs can dampen demand as households use more disposable income to service interest expenses, which, in turn, can cool inflation.

Despite the large, sustained increase in interest rates over the last couple of years, consumer finances show only moderate signs of stress. Chart 1 shows that as of September 2024, credit card delinquency rates have not risen for prime borrowers (blue line) since policy tightening began. Although delinquency rates have risen for subprime borrowers by 5.6 percentage points over the same period, these borrowers make up only 23 percent of the total consumer credit market.

Read more at Federal Reserve Bank of Kansas City

Missouri Lawmakers Pass Changes to Payday Loans

JEFFERSON CITY (AP) - Missouri lawmakers have final approval to legislation that would eliminate renewals on payday loans and lower the interest lenders can charge.

The Senate voted to send the bill to Gov. Jay Nixon Thursday with a 26-4 vote. The House passed the same measure earlier this week.

Current law allows payday loans to be renewed up to six times and permits lenders to charge fees and interest up to 75 percent of the original loan amount. The legislation abolishes the renewals and reduces the cap on interest to 35 percent. Borrowers could also enroll in an extended payment plan without being charged additional fees on interest.

In Missouri, these small, unsecured loans can be up to $500 and last from 14 to 31 days.

Read more at AP

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Comerica Bank abused and neglected vulnerable customers who relied on prepaid card for federal benefits

The Consumer Financial Protection Bureau on Friday charged Comerica Bank with abusing and neglecting vulnerable customers who receive federal benefits.

“The CFPB is suing Comerica Bank for illegally harming disabled and older Americans who count on Social Security and other federal benefits,” CFPB Director Rohit Chopra said in a release.

“By deliberately disconnecting millions of calls and harvesting illegal junk fees, Comerica boosted its bottom line at the expense of Americans living on a fixed income.”

For nearly two decades, the CFPB said in a civil complaint, the Texas-based bank has enjoyed an exclusive contract with the U.S. Department of Treasury to handle delivery of those benefits on prepaid debit cards, known as the Direct Express program.

Direct Express card users are primarily elderly and disabled Social Security beneficiaries who otherwise lack access to traditional forms of banking. 

Read more at NBCNEWS.COM

FDIC Issues List of Banks Examined for CRA Compliance: FDIC

WASHINGTON - The Federal Deposit Insurance Corporation (FDIC) today issued its list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in September 2024.

The CRA is a 1977 law that requires the FDIC to assess a bank’s record of meeting the credit needs of its entire community, including those of low- and moderate-income neighborhoods, consistent with safe and sound operations. As part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Congress mandated the public disclosure of an evaluation and rating for each bank or thrift that undergoes a CRA examination on or after July 1, 1990.

You may obtain a consolidated list of all state nonmember banks whose evaluations have been made publicly available since July 1, 1990, including the rating for each bank, or obtain a hard copy from FDIC's Public Information Center, 3501 Fairfax Drive, Room E-1002, Arlington, VA 22226 (877-275-3342 or 703-562-2200).

Read more at The Federal Deposit Insurance Corporation (FDIC)