Tag Archives: metrics

Measuring Progress at the CFPB

Posted on by

The Bipartisan Policy Center issued a white paper, The Consumer Financial Protection Bureau: Measuring the Progress of a New Agency:

This paper measures the agency’s actions against its mandate.  It analyzes the start-up and operational challenges the Bureau has faced and the critical choices it has made. Throughout this process, the Task Force met with leading consumer advocates, federal and state bank regulators and their staffs, and regulated industry participants in the bank and nonbank space. (5)

I was particularly intrigued by the external metrics that the Bipartisan Policy Center recommends for the CFPB:

  • Are there quality, safe products available in both the bank and nonbank space?
  •  Is the CFPB identifying and responding promptly to problems in both the bank and nonbank space?
  • Does the Bureau engage consumers in a meaningful way? For example, specific metrics should track its regulatory and outreach efforts to growing minority populations.
  • Is the CFPB collaborating effectively with other regulators in both the bank and nonbank space, to ensure a high level of consumer protection?
  • Is there a healthy amount of quality product innovation in the financial services marketplace the Bureau regulates? (10)

These are all reasonable metrics, but most importantly, the white paper “recommends that the CFPB measure success as it relates to consumer behavior by finding demonstrable evidence of improved consumer decision-making with regard to consumer products.” (10) I think that this is perhaps the most important of the metrics and one that the CFPB has made the least progress in measuring. It will be interesting to see how the CFPB makes progress in this regard.

The rest of their findings are organized as follows:

  • Guidance vs. Rule-Making
  • Supervisory and Examination Process
  • Data Requests and Collection
  • Consumer Complaint Portal
  • Civil Penalty Fund
  • CFPB Consultation with Other Agencies
  • CFPB’s Authority to Cover Lending Activities of Auto-Dealers
  • CFPB Funding and Accountability
  • Performance Metrics
  • [External Metrics]
  • Internal Metrics

Financial Literacy Literacy

Posted on by

Personally, I was disappointed by the CFPB’s Financial Literacy Annual Report. It seems to me that the Bureau’s Division of Consumer Education and Engagement is thinking too small in setting forth its research agenda. For its financial education evaluation project,

The Bureau is conducting a quantitative evaluation of two existing financial coaching programs. Financial coaching generally involves one-on-one sessions with clients to increase clients’ awareness of their financial decisions and to provide support for clients to reach financial goals mutually set by the coach and client. (46)

Seems to me that there are some fundamental questions about financial literacy that need to be studied before small, resource-intensive projects like financial coaching are. I have blogged about these issues before, but the bottom line is that there is no solid empirical evidence that financial education achieves good results in general. So why study particular initiatives?

I would like to see the Bureau engage in a broad survey of financial literacy first and then develop a research agenda that reflects the big issues, including

  • do improved disclosures improve outcomes for consumers?
  • do consumers have the basic math skills to take advantage of disclosures?
  • what useful metrics exist for measuring the impact of financial literacy initiatives?

These are just a few big questions that I would want to answer before I looked at particular programs.

The Bureau should start from the premise that we have little reason to believe that financial education works.  Let’s build up a body of knowledge from there. If we assume that it works, as the Bureau’s current research agenda implies, then that assumption can lead us on a wild goose chase as we study program, after initiative, after project, looking for that golden-egg laying goose.