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Letters to Regulators

National Strategy to Promote Financial Literacy

October 20, 2004

October 20, 2004

Department of the Treasury
Financial Literacy and Education Commission
Room 5001B
1500 Pennsylvania Ave., NW
Washington, DC 20220

RE: Comment Request for Financial Literacy and Education Commission National Strategy

Dear Sir/Madam:

The Independent Community Bankers of America (ICBA)¹ appreciates the opportunity to comment on the Department of the Treasury's development of a national strategy to promote basic financial education for everyone in the United States.

Background

Community Banks throughout the United States are dedicated to serving their local communities and towns with financial literacy programs in an effort to reach the unbanked populations. Many of these local communities have limited resources and rely heavily on the expertise of their local community banking institution for financial guidance. Also, many of these populations include non-native Americans or new arrivals that require assistance in understanding the banking system.

The U.S. banking system differs greatly from those in other countries, particularly in countries where banking is government controlled. As a result, many immigrants to the United States are unfamiliar with the differences in our banking system. Additionally, financial education is not a curriculum requirement in the public school system. Therefore, young adults rely on family members for basic financial education.

Statistics reveal a staggering percentage of residents in the United States do not have a relationship with a financial institution. These statistics suggest a potential lack of financial education and /or understanding of the U.S. banking system. Furthermore, statistics show that personal bankruptcy and consumer debt continue to rise, particularly in the 24 to 36 year old age group.

The financial education is critical to the well being of all U.S. residents. Recent studies clearly strengthen the argument that financial education leads to making better individual purchasing decisions, and greater potential for home-ownership, and decreases the potential of becoming a victim of predatory lending practices.

What are the three most important issues that the national strategy should address, and why?

ICBA strongly believes a comprehensive national strategy is important to address the issue of financial education. We believe the three most important components of this strategy include:

Require financial education as an essential curriculum component in public schools.
Require financial education programs for personal bankruptcy cases.
Stronger partnerships with financial institutions of all sizes and that reach all urban and rural communities.

What existing resources may be used to address those issues and how could they be deployed?

ICBA believes the current infrastructure exists to properly implement a financial education strategy. These include:

The public school systems throughout the U.S. serve as an ideal setting for financial education of students preparing for adulthood.
Bankruptcy courts could mandate financial education as a requirement to avoid post-bankruptcy financial misfortune.
Financial institutions, particularly local community-based banking institutions represent a partnership opportunity as stand-alone educational resources, or in partnership with schools and bankruptcy courts to provide financial guidance and education.

What are the best ways to improve financial literacy education in the United States?

Although there are many similar financial education tools, ICBA supports their alliance with FDIC in promoting the Money Smart curriculum. We believe Money Smart is a well-designed curriculum and provides all of the tools necessary to teach financial education to the broadest populations.

But educational tools and infrastructure (as mentioned in question 1) are just the beginning. Additionally, a key component is some measurable action toward assisting these institutions in providing financial education.

Additional Comments

ICBA is committed to supporting financial literacy and education programs. The following is the text of ICBA's 2004 Policy Resolution on Financial Literacy.

Knowledge is empowering. Making effective financial decisions and knowing how to manage money are skills critical to excelling in life and enjoying a secure financial future. Unfortunately, too many Americans of all ages and backgrounds lack sufficient financial skills and knowledge to manage their finances and fully participate in the mainstream banking system. The evidence lies in mounting consumer debt, fallings savings rates, skyrocketing personal bankruptcies and the proliferation of high-cost, non-bank "fringe" providers. Moreover, millions of Americans, including many recent Hispanic immigrants, do not have any relationship with a depository institution.

Closing the gap in financial knowledge for a variety of people will foster financial stability and benefit individuals, communities, and our nation as whole. Whether telling students how to manage credit responsibly, helping a family understand the home buying process or teaching foreign-born residents the benefits of having a checking account, financial literacy programs build a stronger future for all.

Community banks currently engage in a wide range of financial education efforts, many in conjunction with local schools and civic groups. But ICBA recognizes there is more the industry can do. For this reason, ICBA will continue to forge government, nonprofit and private-sector partnerships that will bring more financial literacy ideas, programs and resources to community banks and their communities.

ICBA will also continue to encourage its members to help address all of the financial literacy needs within their local markets.

ICBA stands ready to work with the Department of the Treasury and the Financial Literacy and Education Commission to advance the goal of financial education for all U.S. residents. Thank you for the opportunity to comment on this important issue.

Sincerely,

Anthony Sidiropoulos
ICBA Director of Marketing


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