CFPB Outlines Study Findings
The Consumer Financial Protection Bureau (CFPB) released on Tuesday, September 3rd the results of a pilot study called Planning for Tax-time Savings. Conducted in conjunction with H&R Block, the study found that simple messages encouraging customers to use the saving feature on their prepaid tax- refund credit card that is provided by tax-preparation firms, increases the likelihood that consumers would actually use the savings option.
The study was conducted during the 2017 tax season and randomly assigned a subset of H&R Block customers who accepted prepaid cards to receive tax refunds into three groups: one received a message encouraging them to save, a second received a message and a small $5 incentive to do so, and the third group received nothing.
The customers that received the incentive were more likely to use the savings feature on the card. The message without the incentive also increased savings. The proportion of consumers with savings in their accounts did decrease over time, however. Those with larger earned-income tax credits were more likely to save while those who used refund anticipation checks were less likely.
“One of my priorities is to move the needle in the number of Americans who can cover a financial shock,” said CFPB Director Kathleen Kraninger. “There are many statistics underscoring the lack of savings, including a recent one by the Federal Reserve showing that 40 percent of Americans would turn to credit to cover a $400 emergency. As the Bureau continues to identify solutions to encourage consumers to save, the results from this study shows that even with small encouragement, consumers will save.”
Encouraging consumer savings is an important part of financial health and security. AFSA members offer a variety of safe, affordable credit options for all types of consumers, and stand ready to offer that credit in both emergencies and for everyday spending. The AFSA Education Foundation similarly can provide financial literacy programming, including a focus on such fundamentals as how to open a savings account and to budget and save for emergencies.
September 3rd, 2019 by Dan Bucherer