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BREAKOUT SESSION Promoting responsible use of credit among young people

BREAKOUT SESSION Promoting responsible use of credit among young people

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BREAKOUT SESSION Promoting responsible use of credit among young people

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  1. BREAKOUT SESSIONPromoting responsibleuse of credit amongyoungpeople 20 April 2016

  2. Promoting responsible use of credit among young people Moderator JimStolze Founder of TEDx Amsterdam, The Netherlands Panelists Helen White Head of Financial Capability, UK Money Advice Service, United Kingdom Ana Claudia Silva Leoni Superintendent of Education at the BrazilianFinancial andCapitalMarket Association Minou van der Werf Researcher at Nibud, The Netherlands LyndwillClarke Chairperson of the Consumer Financial EducationTechnical Committee of the Committeefor Insurance, SecuritiesandNon-banking Authorities (CISNA), South Africa Janneke Ratcliffe Assistant Director, Office of Financial Education, Consumer Financial Protection Bureau, United States of America To change this text choose menu Insert > Header and Footer

  3. I. The problem To change this text choose menu Insert > Header and Footer

  4. Disclaimer This presentation is being made by a Consumer Financial Protection Board representative on behalf of the Bureau. It does not constitute legal interpretation, guidance or advice of the Bureau. Any opinions or views stated by the presenter are the presenter's own and may not represent the Bureau's views. Note: This document was used in support of a live discussion. As such, it does not necessarily express the entirety of that discussion nor the relative emphasis of topics therein.

  5. US: College Campus Credit Cards • Restricted marketing of practices • Restricted extension of credit to persons under 21 • Required disclosure of agreements http://files.consumerfinance.gov/f/201512_cfpb_college-credit-card-agreements.pdf Number of accounts fell 58% 2009-2014 5

  6. US: Credit histories and scores Experian 2012 data, scores are VantageScores. http://www.experian.com/live-credit-smart/live-credit-smart-2012.html 6

  7. One in five young adults is over-indebted Over-indebtedness is where people report that keeping up with bills and commitments is a ‘heavy burden’ and/or they have fallen behind with or missed payments in at least three of the last six months. Those aged 25-34 are the age group most likely to be living with a debt problem (one in four or 2.1m). UK average is 16%, just under one in six adults. This rises to one in five 18-24 year olds, with geographical hotspots where it is higher. Over-indebted 18-24 year olds are less likely to be finding their debts a heavy burden, but more likely than other age groups to be missing payments. Promoting responsible use of credit among young people

  8. Impulse buying is also more prevalent among almost a third of young adults, higher than other age groups All 18+ Young adults Working age Retirement age • O4. Impulse buying can affect how you manage your money • Base: All: All 18+ (3,461), Young adults (744), working age (2,786), retirement age (680) • Financial Capability Survey 2015. Don’t knows not shown Promoting responsible use of credit among young people

  9. Reported debts over £20,000 – including student loans – is highest among young adults at 11% April 2016 is when graduates who took out increased student loans for higher education from 2012 start paying them back. • E7. If you added up all of your/your and your partner/spouse’s balances on credit cards, store cards, • personal loans, hire purchase, car finance arrangements and student loans, approximately how much do you owe? • Base: All: All 18+ (3,461), Young adults (744), working age (2,786), retirement age (680) • Financial Capability Survey 2015. Don’t knows not shown Promoting responsible use of credit among young people

  10. 61% of Brazilian households are in debt Source: CNC – National Confederation of Commerce, Services and Tourism Peic: Consumer Debt and Default Survey

  11. What grade would you assign to your financial life? Average*:: 6,2 1 10 7 to10 1 to3 4 to6 10,9% 43% 46,1% What strategy do you adopt every month to honor all your commitments? Source: SPC Brasil/Meu Bolso Feliz *Young adults between 18 and 34 years old

  12. What are your main expenses? Technology(Smart phone, Internet and pay TV) (55%) What items do you cut when you have to save? Entertainment (66%) Radar Jovem, 2015 – B2

  13. Awareness and Holding of Credit and Loan Products HSRC Social Attitude Survey 2015 • Awareness of different types of formal and informal credit and loans remains fairly constant across age groups • However, the holding of credit and loans follows the same inverted u-curve pattern that is mirrored in the self-reported indebtedness measure (lifecycle effect)

  14. Self-reported indebtedness Are there age group differences in levels of self-reported indebtedness? • Reported current over-indebtedness follows an inverted u-curve across the lifecycle • It increases progressively from around a tenth of those in their late teens (9%) to a high of 26% of those aged 35-49 years • It falls again to slightly below a fifth of older cohorts. • Above-average levels of reported over-indebtedness are apparent among those aged between 25 and 50 years • Likely to at least partially reflect additional financial commitments associated with the transition to adult roles, especially marriage (and lobola) and parenthood. HSRC Social Attitude Survey 2015

  15. Debt among 18- t/m 24-year-olds in the Netherlands Source: Nibud, 2014 Minou van der Werf, Nibud

  16. Experience of debt Actually having debt (in our definition): 42% ≠ experiencing debt: 22% ≠ experiencing financial problems: 8% Not everyone sees having a shortage of money as a problem: 76% Depends on the attitude toward it. Source: Nibud, 2014 Minou van der Werf, Nibud

  17. II. Causes To change this text choose menu Insert > Header and Footer

  18. Social Impact/Cause of debt • Of the total 23.74 million credit-active consumers, 41.6 % have impaired records -NCR Quarterly Report, December 2015 • Main spending – Entertainment + Clothing - Clothing store credit cards • One third of 24.5% unemployemet in SA is youth - StatSA, March 2016 • Target for unregulated money lenders - “Mashonisa’s” • Loans for Lobola – South African Council Of Churches • Lobolaas a reason for delayed or deferred marriage (47% Men / 50% women – 16-34) – HSRC 2013 • Young men indebted early on life To change this text choose menu Insert > Header and Footer

  19. Causes of debtbehavior & financial upbringing Behavior: Materialism Impulsiveness Financial upbringing pays: People who say they learned from their parents how to handle money: • have less trouble making ends meet: 36% to 59% • less often have financial problems: 15% to 48% Also: children see, children do Source: Nibud, 2016 Minou van der Werf, Nibud

  20. III. Solutions To change this text choose menu Insert > Header and Footer

  21. Young adults and life transitions There is a lot of evidence to indicate that key transitions in life – life events – offer a prime ‘teachable moment’ to improve financial capability for people of all ages. Young adults can go through many transitions – and increase their risk of accumulating debts – in navigating their own pathway to sustainable incomes and independent living after school. They can start off in a highly vulnerable state, for example if they are leaving care or facing homelessness – or they can experience vulnerabilities at any point during these transitions. We are looking to pilot interventions that reflect young adults’ true experiences of money management in these contexts. Promoting responsible use of credit among young people

  22. Near-to-peer is an approach we tested Near-to-peer is an established approach used in youth practice, which we tested in the context of financial capability. We used ‘exposure sessions’ in research labs to test our hypothesis that 16-21 year olds (young people) would respond well to ‘money stories’ told by near-to-peers aged 22-29 (young adults). Empathy with the ‘just like me’ message was found to produce a change of attitudes and of planned behaviours among participating 16-21 year olds. We are looking at the feasibility of piloting near-to-peer interventions in real-life settings and contexts. Promoting responsible use of credit among young people

  23. Como Investir em Você (Howtoinvest in you) + 1 EARNING 2 SPENDING 3 SAVING 4 INVESTING 5 PLANNING

  24. Some results • Program implemented in 2014 • It is currently available in7 universities • More than 74,000 students have been invited to attend the course • More than 23,000 subscribers • More than 7,000 approved • In 2016, the course is being offered to 191,000 students Source: How to invest in you - ANBIMA

  25. Interventions

  26. Combining the best of two worldsEffective (!) financial education & choice architecture Positive effect on financial knowledge and skillsquestions, not on numeracy related questions Drawback: no control group Source: Nibud, 2014 Minou van der Werf, Nibud

  27. Combining the best of two worldsEffective (!) financial education & choice architecture Before 2009/2010 Before 2013/2014 After 2009/2010 After 2014/2015 Maximum loan Amount you already received Source: Van der Steeg& Waterreus, 2015 Minou van der Werf, Nibud