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STATEMENT

OF

JOANN JOHNSON, CHAIRMAN

NATIONAL CREDIT UNION ADMINISTRATION

ON

# "Financial Literacy and Education: The effectiveness of governmental and private sector initiatives"

BEFORE THE

hOUSE fINANCIAL sERVICES COMMITTEE

April 15, 2008

[Introduction]{.underline}

The National Credit Union Administration's (NCUA) primary missions are
to ensure both safety and soundness and compliance with applicable
federal regulations for federally insured credit unions. It performs
these important public functions by examining all federal credit unions
(FCU), participating in the supervision of federally insured
state-chartered credit unions in coordination with state regulators, and
insuring credit union member accounts. In its statutory role as the
administrator for the National Credit Union Share Insurance Fund
(NCUSIF), NCUA provides oversight and supervision to 8,101 federally
insured credit unions (as of 12/31/07), representing 98 percent of all
credit unions and approximately 87 million members.[^1]

NCUA regulates and insures all FCUs and insures most state-chartered
credit unions. Under this framework, NCUA is responsible for enforcing
regulations in FCUs and for evaluating safety and soundness in all
federally insured credit unions. NCUA is responsible for monitoring and
enforcing compliance with most federal consumer laws and regulations in
FCUs. In state-chartered credit unions, the appropriate state
supervisory authority has regulatory oversight and enforces state
consumer laws and regulations.

NCUA appreciates this opportunity to outline the important role it and
the credit union community are playing in our nation's financial
literacy efforts. NCUA's testimony will address its financial literacy
initiatives and programs, examples of the credit union community's best
practices pertaining to financial literacy programs, the role of NCUA's
service as a member agency on the U.S. Financial Literacy and Education
Commission (Commission), and NCUA Chairman JoAnn Johnson's role as chair
of the Commission's My.Money.Gov website subcommittee.

**[NCUA's Efforts to Promote Financial Literacy]{.underline}**

NCUA has a long history of providing financial education programs for
use by credit unions. For example, in the 1960s NCUA's predecessor
agency the Bureau of Federal Credit Unions, in concert with the U.S.
Office of Economic Opportunity, chartered over 700 federal credit unions
aimed specifically at providing financial services to low-income
consumers. The Bureau of Federal Credit Unions also provided consumer
education programs such as Project Moneywise, to support these new
credit unions.[^2] Current NCUA efforts are focused in three main areas
-- training, assistance, and partnership programs.

**Training**

NCUA hosts a variety of training workshops and conferences to help equip
the credit union industry with best practices to improve the financial
literacy of credit union members, particularly those of underserved
communities. NCUA's Office of Small Credit Union Initiatives conducts
numerous credit union workshops across the country, tailored
specifically to credit unions with assets of \$50 million or less. The
free training provides credit unions with information designed to bring
underserved consumers into the financial mainstream and enhance their
financial literacy. Since institution of these workshops, approximately
1,900 credit union representatives from 1,060 credit unions have
attended.

"Access Across America" is a financial education initiative created and
implemented by NCUA that features periodic regional conferences
highlighting public and private-sector "best practices" initiatives and
solution-based efforts for consumers in lower income strata. These
conferences have focused on issues such as sustaining homeownership;
saving for education and retirement; building assets through the IRS
Volunteer Income Tax Assistance Program (VITA); improving use of credit;
and meeting the special financial needs of military communities.

Additionally, NCUA promotes financial literacy through a "Financial
Literacy Library" located on its website,
[www.ncua.gov](http://www.ncua.gov/). The library provides consumers
access to a clearinghouse of printable brochures and resources
addressing important financial management topics, including identity
theft prevention, credit card debt management, and detailed information
about NCUSIF-insured accounts. The library also includes links to
resources provided by Federal agencies and the private sector, including
FDIC Consumer News and Money Smart, U.S. Department of Treasury's Office
of Financial Education, and Jump\$tart.

**Assistance**

To further the Agency's outreach to underserved communities, NCUA
administers the Community Development Revolving Loan Fund (CDRLF)
program. CDRLF is funded through congressional appropriations, providing
financial assistance for low-income designated credit unions -- credit
unions consisting of 50 percent or more low-income members. This
financial assistance may be in the form of a loan or a technical
assistance grant (TAG). The financial assistance programs are broadly
structured so that low-income designated credit unions may create
outreach programs that meet individual community needs. Since 2004, NCUA
has awarded \$500,341 in TAGs to credit unions for financial education
and related purposes. Examples of successful implementation of these
resources by NCUA include:

-   Consolidated member outreach grants into the *Enhancing Member
    Services TAG Initiative*. Credit unions were able to receive funding
    for financial education, homeownership, and other member outreach
    programs.

-   Offered grants to low-income credit unions specifically for the
    implementation of a *Financial Education TAG Initiative*. This
    initiative funded basic credit counseling and savings programs that
    help consumers avoid or prevent foreclosure.

-   Promoted the *Volunteer Income Tax Assistance TAG Initiative*,
    including a financial education portion.

-   Developed the *Outreach and Partnering TAG Initiative* which
    embodied the *Enhancing Member Services TAG Initiative*, and added
    an opportunity for credit unions to establish a partner relationship
    with a government agency, community group, school, or non-profit,
    for the purpose of providing financial education, homeownership, or
    savings programs to their communities. Using the strengths of the
    partner organization, the credit union could provide services to the
    community.

Notable success stories of the TAG Initiative benefiting credit unions
include:

-   Syracuse Cooperative Federal Credit Union in Syracuse, New York,
    offers bi-lingual financial education workshops addressing
    homeownership, qualifying for a mortgage, and building credit. The
    credit union also deploys financial advisors who help members avoid
    foreclosure by providing housing counseling and access to mortgage
    lenders, realtors, or legal advisors. The credit union used the
    funds to revise a financial education workbook for teaching disabled
    high school students.

-   North Side Community Federal Credit Union in Chicago, Illinois,
    serves recent immigrants by linking its financial education program
    to a citizenship readiness program, providing counseling to
    immigrants regarding saving and money management.

In addition to offering financial assistance, NCUA staff provides
technical assistance and expertise to credit unions serving low-income
populations. For example:

-   NCUA staff worked to enhance delivery of financial education
    resources to Native American populations served by Bear Paw Credit
    Union in Havre, Montana, enhancing delivery of financial education
    resources to the Native American population residing on the nearby
    Fort Belknap Indian Reservation.

-   NCUA's Economic Development Specialists (EDS) are trained to provide
    individualized assistance to credit unions. EDS facilitates
    strategic planning sessions and provides insight so credit unions
    may include financial literacy programs in their strategic plan.

**Partnerships**

Through current and past initiatives such as the "Partnering and
Leadership Successes" program, NCUA promotes the formation of
partnerships among and between credit unions, community based
organizations, government agencies, and other entities to increase
financial education initiatives available to credit union members and
their communities. NCUA fosters these partnerships by communicating
available opportunities during training events, conducting on-site
contacts at credit unions, and providing collaboration tools on the
Agency's website. In addition to implementing partnership initiatives,
NCUA reviews and enhances existing programs on a continuing basis.[^3]

*Another partnership that NCUA has facilitated involves Biz Kid\$, *a
national television series aimed at young people that promotes financial
education.** ** Produced for PBS by the Emmy-Award winning creators of
*Bill Nye the Science Guy*, *Biz Kid\$, the series, currently airing in
47 states,* focuses on financial literacy and entrepreneurship. The
series encourages elementary and middle school students to learn basic
concepts about money and business, and apply those concepts to real-life
situations.   NCUA recognizes the value of this type of programming and,
in an effort to raise the profile and underscore the importance of
disseminating information about financial literacy in as broad and
practical way as possible, Chairman Johnson taped a video introduction
targeted at credit unions in 2007.

**[Industry Best Practices Pertaining to Financial Literacy
Programs]{.underline}**

The Federal Credit Union Act defines the term "\[Federal\] credit union
as a cooperative association organized for the purpose of promoting
thrift among its members and creating a source of credit for provident
or productive purposes."[^4] Credit unions are committed to helping
their members achieve financial self sufficiency, and thus consider
financial literacy as an important responsibility to their members. A
recent NCUA study based on a survey of 472 randomly selected FCUs found
that 42 percent of credit unions provide financial literacy programs
(including programs focused on students), and 60 percent offer financial
counseling that incorporates financial education.[^5] Several examples
of successful financial literacy programs within the credit union
industry are included below:

-   Hawthorne Credit Union in Naperville, Illinois, employs bilingual
    staff in every member contact area, facilitates communication with
    members in more than seven languages, and reaches immigrant
    populations who would otherwise turn to predatory lending
    alternatives. Hawthorne Federal Credit Union now offers financial
    education for their multilingual and low-income members.

-   Bull's Eye Credit Union in Wisconsin Rapids, Wisconsin, conducts
    financial literacy programs in the local schools. Topics discussed
    with students include: the importance of traditional financial
    institutions; accurately completing loan applications; and avoiding
    payday lenders. In a classroom setting, the credit union's president
    reviews the loan application process and a sample credit report.

-   Navy Federal Credit Union in Merrifield, Virginia, features a
    step-by-step process on their website to assist members with
    determining how much they can afford to borrow while meeting the
    unique financial challenges present within the military community.

-   Central Minnesota Federal Credit Union in Melrose, Minnesota,
    conducts an annual home buying seminar, educating members to become
    responsible consumers by preparing them for the entire home buying
    experience, such as making an offer on a home; budgeting for
    household experiences; and anticipating closing costs.

-   Security Service Federal Credit Union in San Antonio, Texas,
    provides financial education to different age groups within its
    membership. For example, "Senior Smart Seminars" discuss age-related
    issues, like "Planning for Long-Term Care," to senior citizens.

-   Alternatives Federal Credit Union in Ithaca, New York, designed a
    model describing where people are situated in various points along a
    continuum between poverty and self-sufficiency, what financial
    services are needed, and how to move along the "Alternatives Credit
    Path®" to financial independence. The credit union also offers
    "Money Wise," a practical guide that provides consumers with tools
    to address financial issues.

-   Police and Fire Federal Credit Union in Philadelphia, Pennsylvania,
    partners with the Consumer Credit Counseling Service of Delaware
    Valley to provide members with access to free confidential credit
    counseling and debt management planning.

-   Through the New York City Financial Network Action Consortium, Lower
    East Side Federal Credit Union, Lower East Side People's Federal
    Credit Union, Union Settlement Federal Credit Union, and Brooklyn
    Cooperative Federal Credit Union process Individual Taxpayer
    Identification Number applications and offer Individual Development
    Accounts (IDAs) in conjunction with financial literacy training.
    Lower East Side Federal Credit Union also offers home and
    association financing options for low-income residents, including
    rehabilitation financing in partnership with the Housing Development
    Finance Corporation.

-   The Dover Federal Credit Union in Dover, Delaware, offers financial
    education for youth, called the "Money Matters for Kids" program and
    the "What in the World" program. Since its beginnings in 2001, the
    Award Winning DFCU Kids Making Cents Club has focused on educating
    parents and kids about the importance of starting good savings
    habits early in life. The credit union encourages young members to
    save by rewarding them with a token for each deposit which can be
    redeemed for a variety of prizes. Open to children age 17 and under,
    the club has more than 2,800 little savers enrolled. The credit
    union offers a link on its website to the \"Googolplex^TM^\"
    site[^6] filled with more fun for the children. Additionally, the
    credit union partnered with the Dover Air Force Base Services
    Squadron in 2006, providing "Money Matters for Kids" seminars to
    children of their military members. This monthly series of seminars
    combined education in basic financial matters with other life skills
    training and was hosted at the Dover Air Force Base Youth Center.

-   HarborOne Credit Union in Brockton, Massachusetts, partners with
    several community organizations and businesses to hold an annual
    "Credit for Life Fair." The credit union partners with several
    community organizations and businesses to host the fair, gathering
    over 250 high school seniors in the community to learn how to budget
    and plan for their financial future. The students select an
    occupation that is of interest to them and at the fair they figure
    out how they will live plan a budget based on the salary of the
    selected occupation. Volunteers from the community participate in
    the effort. During the fair the students are given different
    problems to solve designed to motivate the students to think about
    the unexpected financial challenges they may face as they become
    adults. Since their inception, the success of these financial
    education fairs have been well noticed, as many visitors from other
    areas of New England have attended and reproduced the event in their
    own communities.

Another way credit unions are able to offer financial literacy programs
is to partner with government entities that provide assistance. Some
credit unions are certified by the U.S. Department of the Treasury's
Community Development Financial Institutions Fund (CDFI) and are
recipients of awards.[^7] These awards assist in defraying the costs of
serving disadvantaged communities. For example, Latino Community Credit
Union in Durham, North Carolina was awarded funds to defray the costs of
offerings bilingual financial services and financial literacy. Financial
education classes are provided twice each week in each of the five
branches with one-on-one member financial counseling. In addition, free
credit counseling is provided over the telephone.

Credit union trade associations also assist credit unions and
communities with promoting financial literacy programs. For example, the
industry awarded the Michigan Credit Union League for cosponsoring a
Money Smart Week consisting of more than 30 educational seminars and
partnering with Michigan State University Extension to provide free
teacher training for NEFE programs.[^8]

The credit union industry consistently gathers and applies current
research to meet consumer demands. The Filene Research Institute, a
nonprofit enterprise organized by the credit union industry, has
developed specific financial literacy web based products,[^9] including
the following:

-   "Lot\$a Mot\$a" -- A computer lab where elementary and high school
    students can learn about prudent financial practices.

-   "Virtualfinance" -- Web based initiative using "virtual worlds" to
    attract and educate young adults.

-   Savings Revolution -- Web-based resource which encourages members to
    eliminate debt and build wealth through a "Savings Challenge"
    promotion between selected members. Members have the opportunity to
    exhange useful financial education information with each other
    online.

-   Women: A Strategy for Success -- A package of financial services to
    improve knowledge of budgeting and enhance financial independence.

**[NCUA's Role on Financial Literacy and Education
Commission]{.underline}**

NCUA is a member of the U.S. Financial Literacy and Education Commission
(Commission). The Commission, established in accordance with the Fair
and Accurate Credit Transactions Act (FACT Act), consists of 20 federal
agencies and is chaired by the Secretary of the Treasury. The purpose of
the Commission is to improve the financial literacy and education of
persons in the United States through the development of a national
strategy to promote financial literacy and education.[^10] In 2006, the
Commission published *Taking Ownership of the Future: The National
Strategy for Financial Literacy.* The Strategy serves as a blueprint for
the Commission's efforts moving forward. Consisting of various "Calls to
Action", the Strategy outlines specific goals for the Commission to
achieve.

In October 2004, in accordance with FACT Act (Public Law 108-159 Section
514), the MyMoney.Gov website was established.[^11] The MyMoney.Gov
website serves as a clearinghouse of information about Federal financial
literacy and education programs; provides a coordinated entry point for
accessing information about all Federal publications, grants, and
materials promoting enhanced financial literacy and education; offers
information on all Federal grants to promote financial literacy and
education, and on how to target, apply for, and receive a grant that is
most appropriate under the circumstances; features website links to
efforts that have no commercial content and that feature information
about financial literacy and education programs, materials, or
campaigns; and offers such other information as the Commission finds
appropriate to share with the public in the fulfillment of its
purpose.[^12]

The website contains over 400 links to resources addressing important
economic issues facing consumers, including:

+-----------------------------------+-----------------------------------+
| -   Budgeting and Taxes           | -   Financial Planning            |
|                                   |                                   |
| -   Credit                        | -   Home Ownership                |
|                                   |                                   |
| -   Privacy, Fraud and Scams      | -   Responding to Life Events     |
|                                   |                                   |
| -   Starting a Small Business     | -   Paying for Education          |
|                                   |                                   |
| -   Savings and Investing         | -   Retirement Planning           |
+-----------------------------------+-----------------------------------+

On November 1, 2006, NCUA Chairman JoAnn Johnson was appointed Chairman
of the MyMoney.Gov website subcommittee. The membership of the
subcommittee includes representation among various Commission agencies.
As chair of the website subcommittee, Chairman Johnson coordinates
meetings on a quarterly basis to plan and implement enhancements to the
site while providing the Commission with updates about the website
during informal and formal meetings.

During Chairman Johnson's tenure as Chairman of the Website
subcommittee, the website has undergone significant updates and
enhancements. For example:

-   Additional homeownership and foreclosure prevention resources for
    Americans has been added, including a section highlighting home
    buying, home equity, and mortgage information. In addition, in the
    "What's New" section on the main page of the website, the telephone
    number to the HOPE NOW hotline is listed. HOPE NOW is a cooperative
    effort of counselors, investors, and lenders that are working to
    maximize outreach efforts to homeowners in distress. The hotline,
    (1-888-995-HOPE), provides consumers access to HUD-approved credit
    counselors who provide resources to consumers to help avoid
    foreclosure.[^13]

-   Information explaining the economic stimulus payments created by the
    Economic Stimulus Act of 2008 is now featured on the "What's New"
    section of the main page of the website.[^14]

-   In recognition of the economic impact of hurricanes and other
    weather related emergencies to consumers, a link was added to the
    website, featuring helpful information for consumers to manage their
    finances in the event of such emergencies. This link was introduced
    in timely coordination with Hurricane Preparation Week last year.

-   A direct link located on the main page has been added for consumers
    to order the My Money Toolkit. This toolkit, available in both
    English and Spanish, is comprised of financial education
    publications from several Commission member agencies.[^15]

-   As part of the implementation of Call to Action 12.4 of the
    *National Strategy,* calling for the Commission to highlight
    existing partnerships and encourage new partnerships among public,
    nonprofit and private organizations, a new section called the "Power
    of Partnerships" is featured on the main page of the website.
    Examples of these new partnerships include:[^16]

> **1)** The National Financial Education Network of State and Local
> Governments is a network of 60 state governments, local governments,
> and non-profit organizations that represent state and local
> governments.
>
> **2)** FDIC's Money Smart is a resource which helps adults outside the
> financial mainstream enhance their money skills and create positive
> banking relationships.
>
> **3)** IRS/non-profit organization partnerships provide tax free
> counseling and basic income tax return preparation for senior
> citizens.
>
> **4)** *MoneyMath: Lessons for Life* is a four-lesson curriculum
> supplement for middle-school math classes.
>
> **5)** U.S. Department of Agricultures' Cooperative State, Research,
> Education, and Extension Services are programs offered for youth,
> financially vulnerable populations, and consumers making financial
> decisions.
>
> **6)** In addition, an email address:
> <FLECpartnershipideas@do.treas.gov>, is available to allow individuals
> to propose financial education partnerships that the Commission may
> highlight.[^17]

-   A web page was added featuring online calculators, which helps
    consumers save money for college and retirement, make responsible
    home purchasing decisions, and perform other complex financial
    transactions.[^18]

-   A video link to the "Choose to Save" Public Service Announcement"
    moved to the front page of the website. This PSA promotes the
    website as a helpful resource for saving and planning for
    retirement.

The MyMoney.Gov website remains an important financial literacy resource
for American consumers as illustrated by statistics reflecting a period
of time from the establishment of the website in October 2004 up to
March 31, 2008:

-   MyMoney.Gov has received a running total of more than 2,267,000 hits
    on its English-language site, and more than 64,000 hits on its
    Spanish-language site.

-   More than 1,233,000 English-language publications and over 44,700
    Spanish-language publications have been distributed to consumers
    through GSA's Federal Citizen Information Center in Pueblo,
    Colorado.

-   Over 296,000 English and over 11,000 Spanish toolkits have been
    distributed.[^19]

**[Conclusion]{.underline}**

In recent years, President Bush and Congress have both taken tangible
steps to place financial literacy at the forefront of overall efforts to
protect and empower consumers. However, for credit unions, equipping
members with the knowledge and information to make sound decisions has
always been a priority. Credit unions have demonstrated that they view
financial education as a natural outgrowth of their service-oriented
philosophy. Increased financial literacy represents an ounce of
prevention that can help all consumers avoid getting in over their
heads, and actually enable them to use their money wisely and improve
their financial health. The advertising slogan \"an educated consumer is
our best customer\" is very apt when discussing the value of financial
literacy.

Despite NCUA's advocacy for broader dissemination of financial education
into the marketplace, we do not have any illusions about financial
literacy being a panacea. While there are benefits to greater levels of
financial awareness, NCUA does not view financial literacy as a
substitute for strong and comprehensive consumer protections, both
statutory and regulatory.

NCUA appreciates this opportunity to outline Agency and industry efforts
regarding financial literacy. NCUA will continue to dedicate expertise
and resources to assist credit unions in helping consumers make sound
financial decisions throughout their lives. As the importance of
financial literacy grows, so will NCUA's commitment to this vital
effort.

[^1]: Approximately 167 state-chartered credit unions are privately
    insured and are not subject to NCUA oversight.

[^2]: Member Service Assessment Pilot Program (MSAP), page 17.

[^3]: In 2007, the agency formed an Outreach Task Force (OTF) as part of
    NCUA's continuing efforts to improve and support the industry's
    outreach to consumers, especially those of low to moderate income.
    The OTF's report to the NCUA Board was delivered on February 26,
    2008. The report outlines the agency's historical outreach efforts
    along with recommendations to continue to expand efforts to enable
    and encourage a broader spectrum of credit unions serving or having
    the ability to serve low to moderate income consumers. These
    recommendations are currently under review.

[^4]: FCU Act §1752.

[^5]: NCUA, *Member Service Assessment Pilot Program: A Study of Federal
    Credit Union Service* (2006), page 37. Available at
    [www.ncua.gov/reportsandplans/msap/msap-pilot.pdf](http://www.ncua.gov/reportsandplans/msap/msap-pilot.pdf).

[^6]: GoogolplexTM is an online youth magazine, largely written by
    youth, for credit union youth of all ages. The fun games, stories,
    and activities deal with the money matters and life issues each age
    group faces.

[^7]: The CDFI Fund provides financial and technical assistance awards
    in order to promote access to capital and local economic growth in
    urban and rural low-income communities across the nation. A CDFI is
    "a specialized financial institutions that works in market niches
    that are underserved by traditional financial institutions" and
    include regulated institutions such as community development banks
    and credit unions, and non-regulated institutions such as loan and
    venture capital funds.

[^8]: Available at:
    <http://www.creditunionmagazine.com/story.php?doc_id=169>.

[^9]: Available at: <http://filene.org/home/i3/join>.

[^10]: 20 USC § 9702

[^11]: 20 USC § 9702

[^12]: 20 USC § 9703

[^13]: [www.mymoney.gov](http://www.mymoney.gov/) (April 4, 2008)

[^14]: <http://www.mymoney.gov/> (April 4, 2008)

[^15]: <http://www.mymoney.gov/> (April 4, 2008)

[^16]: *Taking Ownership of the Future: The National Strategy for
    Financial Literacy, April 2007,*
    <http://www.treas.gov/offices/domestic-finance/financial-institution/fin-education/support-docs/2007_StrategyRevisions.pdf>
    (April 4, 2008)

[^17]: <http://www.mymoney.gov/partnerships.shtml> (April 4, 2008)

[^18]: <http://www.mymoney.gov/calculators.shtml> (April 4, 2008)

[^19]: Statistics provided by General Services Administration (GSA),
    April 7, 2008