This week, AFSA provided information to the Department of the Treasury on how our members are promoting financial inclusion for the American consumer. The Presidential Commission for Financial Inclusion at U.S. Treasury Department is developing a national strategy for financial inclusion, and AFSA endorsed its formation and has been engaged with this project since its inception.

In this latest response, AFSA took the opportunity to highlight how member companies and the AFSA Education Foundation have promoted financial literacy and inclusion so that every household has the ability to find the most affordable and transparent financial service best suited to address their needs. The response also asks for specific guidance for using new technologies, such as alternative data and machine learning, in order to open new opportunities to expand credit to all groups.

Research suggests that many Americans are not knowledgeable about many financial concepts. In a 2018 survey only 29% of respondents reported being offered financial education at a school, college, or workplace, and only about 20% reported participating in the programs. Importantly, high financial literacy is correlated with increased likelihood of:

• on-time bill payment,
• taking on sustainable amounts of debt, and
• planning for retirement.

It is also correlated with the decreased likelihood of:

• carrying a balance,
• paying interest,
• being charged a late fee,
• or going over a credit card limit.

Below are some examples of the work that AFSA members and the broader financial services industry have initiated to address financial literacy and inclusion.

AFSA Education Foundation

Through its foundation, AFSA is committed to consumer-credit education. The AFSA Education Foundation’s mission is to educate consumers of all ages on personal finance concepts, to help them realize the benefits of responsible money management, and to understand the credit process. AFSAEF’s MoneySKILL program has provided free online financial education to more than 810,000 students.

Installment Lender Financial Literacy and Inclusion

Installment lenders are highly focused on financial wellness. Companies offer copious amounts of educational resources on their websites, including information on credit scores, debt management, and budgeting.

Many companies form community partnerships to develop programs that help borrowers with financial coaching, job seeking, and raising capital for small business opportunities. Members also partner with schools to teach students the importance of managing credit and establishing positive financial habits. Traditional installment loans provide credit to millions of individuals and families, often unbanked, underbanked, credit invisible, or with impaired credit histories, who need access to credit to meet an immediate need. Access to safe financial products is a core tenet of financial inclusion. Unlike other forms of small-dollar credit, such as payday loans, installment loans are the best way for consumers to manage credit and build a positive payment history with the credit bureaus.

Vehicle Finance Lenders and Financial Literacy and Inclusion

AFSA vehicle finance companies provide significant support to and partnerships with financial education programs. One of these partnerships includes Junior Achievement, a nonprofit that teaches budgeting, shopping, and bill paying. Another includes a free financial literacy course through Khan Academy. AFSA has also partnered with the National Automobile Dealers Association a vehicle-finance education program called AWARE. Some companies have also developed their own education programs that aim to teach consumers the basics of the car buying process before the consumer actually buys the car.

AFSA member companies include different types of vehicle finance companies: captive finance companies of vehicle manufacturers that provide financing and leasing indirectly through dealers of new and pre-owned vehicles, bank subsidiaries that provide direct and indirect lending, and independent auto finance companies that provide financing through franchise and/or independent dealers. Many of these companies provide credit-challenged and credit invisible Americans access to vehicles, allowing them to get to school or work. Access to a vehicle can be crucial for financial well-being. According to the U.S. Census Bureau, 69.7% of the American workforce uses a car to get to their job.

Banks and Financial Literacy and Inclusion

AFSA banking members are also working to improve the financial well-being of Americans. AFSA bank members will conduct free home ownership seminars to teach people about the process for home ownership and provide presentations about “saving for a rainy day” to local elementary schools. Other members offer mentoring programs and workshops to help determine financial goals, break these goals into achievable chunks, and make plans to align financial habits with values.