Consumer Financial Protection Research Articles

Exploring associations of financial well-being with health behaviours and physical and mental health: a cross-sectional study among US adults

BackgroundHealth disparities exist across socioeconomic status levels, yet empirical evidence between financial well-being (FWB) and health are limited.MethodsThis cross-sectional study combined data from 25 370 adults aged ≥18 years in...

Financial Education Effects on Financial Behavior and Well-Being: The Mediating Roles of Improved Objective and Subjective Financial Knowledge and Parallels in Physical Health

How does financial education lead to improved financial behavior and higher financial well-being? An influential Consumer Financial Protection Bureau model introduced in 2015 proposes that the goal of financial education is to improve financial well-being and that financial education does so by increasing financial knowledge, which improves financial behavior, which improves financial well-being. In this study, the authors test links in the Consumer Financial Protection Bureau model, examining the differential roles of objective and subjective knowledge. They also test whether an analogous model might capture effects of physical health education on physical health knowledge, behavior, and well-being. They report a quasi-experiment comparing changes in financial and physical health knowledge, behavior, and well-being at two time points in a semester for students enrolled in a personal finance class, a personal health class, or neither. This study reports the first causal estimates of flow from financial education to financial knowledge to financial behaviors to a validated measure of subjective financial well-being. Financial education caused large changes in both objective and subjective knowledge. Yet only subjective knowledge mediated the large effects of financial education on changes in downstream behaviors. The authors find weaker but similar results for physical health. The findings suggest that financial education efforts should be refocused to foster subjective knowledge and improved behavior.

Customized financial literacy: a boon for universal financial inclusion of PWDs post COVID-19 pandemic in developing countries

PurposeCurrently, consumers of financial products and services have become more vulnerable to predatory financial institutions, especially in the aftermath of Covid-19 pandemic. Therefore, financial consumers like the persons with disabilities (PWDs) should be equipped with knowledge and skills to help them to evaluate complex financial products on offer in financial markets, especially in developing countries to avoid being victims of fraudulent lending. The purpose of this study is to establish whether customized financial literacy mediates the relationship between financial consumer protection and financial inclusion of PWDs’ owned MSMEs in rural Uganda post Covid-19 pandemic.Design/methodology/approachSmartPLS 4.0 was used to construct the measurement and structural equation models to test whether customized financial literacy significantly mediates the relationship between financial consumer protection and financial inclusion of PWDs’ owned MSMEs in rural Uganda post Covid-19 pandemic.FindingsThe results revealed a partial mediating effect of customized financial literacy in the relationship between financial consumer protection and financial inclusion of PWDs’ owned MSMEs in rural Uganda post Covid-19 pandemic. Conducting customized financial literacy increases financial consumer protection by 12 percentage points to promote financial inclusion of PWDs’ owned MSMEs in rural Uganda post Covid-19 pandemic.Research limitations/implicationsThis study focused only on customized financial literacy and financial consumer protection to promote universal financial inclusion of PWDs’ owned MSMEs post Covid-19 pandemic. Future studies may use data collected from other vulnerable groups amongst the unbanked population in developing countries, Uganda inclusive. In addition, this study also collected only quantitative data from the selected population. Further studies can be conducted using key informant interviews and focused group discussion to get the perceptions of the PWDs on being protected from exploitation by unscrupulous financial institutions.Practical implicationsThe findings from this study can help policymakers in developing countries like Uganda to revise the existing consumer protection law to include strong clauses on protection of people with special needs like the PWDs. The law must ensure that they are not exploited by financial institutions because of their conditions. The law ought to make sure that the PWDs are educated about their rights in the financial market place and all information on financial products offered by financial institutions should be simplified and interpreted to them before they make consumption decisions.Originality/valueTo the best of the authors’ knowledge, the present study is amongst the first few studies to provide a meticulous and unique discourse on the ever increasing role of financial literacy combined with consumer protection to reduce consumption risks within the financial markets, especially in developing countries in the aftermath of global pandemic shocks. This study uses the social learning theory, theory of reasoned action and theory of planned behaviour to elucidate how customized financial literacy can enhance consumer protection to increase financial inclusion of groups with special needs like the PWDs who have become more susceptible to exploitation by unscrupulous financial institutions in under-developed financial markets, especially in post Covid-19 pandemic.

Institutional Financial Consumer Protection in Czech Republic and Poland: Differences, Strengths, Weaknesses, and Challenges

Abstract The financial market plays a crucial role in economic growth, but it also poses risks to consumers, who may not have the expertise to navigate its complexities. This article examines the importance of consumer protection in the financial market and the legal background for regulation, including the stable and effective institutional set-up of consumer protection in Poland and the Czech Republic. It also discusses various initiatives that have been implemented to safeguard consumers in the financial market, such as regulations and policies designed to prevent deceptive practices and fraudulent behaviour. Finally, the article highlights the challenges facing consumer protection in the financial market regarding the institutions dealing with it, including the need for more effective enforcement mechanisms.

Abstract TP114: Financial Well-Being Among US Adults the Impact of Vascular Conditions and Social Disadvantage

Background: “Financial toxicity” refers to the deleterious impact of healthcare expenditures or conditions. Using the Consumer Financial Protection Bureau’s (CFPB) Financial Well-Being (FWB) Scale, this study evaluated the impact of cardiovascular disease (CVD), stroke, high blood pressure (BP), and high cholesterol on individual FWB. Methods: Using data from the Understanding America Survey—a nationally representative, longitudinal panel of approximately 6,000 adults—we identified adults with self-reported diagnoses of high cholesterol, high BP, stroke, and CVD between 2014 and 2020. Scored between 0 and 100, the FWB Scale can be used to compare a person’s self-assessed financial circumstances including income, savings, debt, financial distress, and preparedness. To assess the potential financial toxicity of these conditions, we used separate stratified, longitudinal mixed regression models for each condition. Model covariates included sex, age, marital status, household size, household income, education, race/ethnicity, insurance, body mass index (BMI), and an indicator of the condition of interest. Differential financial toxicity was captured through interactions between sociodemographic characteristics and condition indicators. Results: Whites had the highest FWB scores (69.0, SD=21.8), followed by other (i.e., Asian, American Native, Hawaiian/Pacific Islander, multiracial) racial groups (66.7, SD=21.0), Hispanics (59.3, SD=21.6), and Blacks (56.2, SD=21.4). After controlling for income, education, and household characteristics, average FWB of individuals with vascular conditions was not statistically different from those without. However, compared to Whites, Blacks with CVD (-7.4, SD=1.0), stroke (-8.1, SD=1.5), high cholesterol (-5.7, SD=0.7), and high BP (6.1, SD=0.7) had significantly lower FWB. Similarly, Hispanics with high BP (-3.0, 0.6) and CVD (-6.3, 1.3) had lower FWB. Income, education, insurance, and marital status were also significantly correlated with FWB for each condition. Conclusions: Findings indicated that FWB was lower among Blacks and Hispanics diagnosed with vascular conditions. These results indicate the potential financial toxicity of vascular conditions.

Financial Access Policy Goals Pursued by the Consumer Financial Protection Bureau (CFPB) in Its Regulatory Function: 2011–2023

Financial Access Policy Goals Pursued by the Consumer Financial Protection Bureau (CFPB) in Its Regulatory Function: 2011–2023

An introduction of transaction session‐induced security scheme using blockchain technology: Understanding the features of Internet of Things–based financial security systems

AbstractInternet of Things (IoT)–based financial systems leverage the capabilities of blockchain and artificial intelligence (AI) to enable seamless transactions and data exchange between devices. IoT‐based financial systems involve interconnected devices and services, such as payment terminals, wearables, and smart appliances, which collect, transmit, and process sensitive financial information. The study explores security methods incorporated in the financial systems designed using IoT and blockchain technologies to improve the background features. The study data were gathered from Complaint Data from the Consumer Financial Protection Bureau 2018–2022, and data‐based analysis is used in this study for detecting illegitimate interrupted transactions. Propensity Score Matching (PSM) is used for the robustness and endogeneity test; descriptive statistics is utilized in this study. Financial security systems are introduced to reduce the forging and breaching of intruders amid transactions. This study offers a novel contribution to the field of blockchain technology by furnishing a comprehensive analysis of the features of IoT‐based financial security systems from the perspective of the transaction, broadening the understanding of the feature focusing on financial security, and providing practical recommendations to address the features of IoT‐based financial security systems in blockchain technology. The study highlights how IoT devices can securely record and verify financial transactions by leveraging the blockchain's distributed ledger, preventing tampering or unauthorized access. The results of the study identify that the TS3 program relies on the transaction gaps between financial sessions, security requests between successive transactions, and sessions saved depending on the time delay. The study finds that sessions were analyzed for violations and fraud using information stored on the blockchain. The study suggests the design and building of devices and sensors in an IoT in financial security systems. Transparency should contribute to setting data privacy and safety problems in financial security systems.

The Microstructure of Mis-Selling: Financial Investment Markets and Regulation in Korea

Financial consumer protection has been ever strengthened around the world after the Global Financial Crisis. Nonetheless, there occurred mis-selling events that caused massive damage to financial consumers and mis-selling still accounts for the largest proportion of financial consumer disputes and complaints recently filed in Korea. Based on the regulatory framework in Korea, this study aims to explore the microstructure of mis-selling, that is, the major influential factors and their interactions. For this, an analytical model is proposed concerning the suitability principle and explanation duty in financial investment markets. The model consists of three basic components: the types of investors, a financial services company’s objective of profit maximization, and the damage compensation structure set by the regulator. Using the model, the simulation results provide meaningful implications. Strict liability turns out to be effective to prevent mis-selling. The suitability principle is more prone to be violated than the explanation duty and therefore more emphasis should be placed on the former in terms of efficient regulation. Furthermore, this study found a meaningful link between business conduct regulation and financial education, which are the two pillars in financial consumer protection.
 
 Received: 4 October 2023 / Accepted: 19 Dcember 2023 / Published: 5 January 2024

Financial Consumer Protection via Insurance Regulator Disclosure of Consumer Complaints

Financial Consumer Protection via Insurance Regulator Disclosure of Consumer Complaints

POLICY SERIES: A SECURE RETIREMENT FOR OLDER WOMEN

Abstract This session will address policy development related to women and their financial well-being in later life. Panelists will discuss the recently passed SECURE 2.0, the latest programs providing financial literacy to older adults, healthcare workforce related issues, and the role of the Consumer Financial Protection Bureau is protecting older adults from fraud and elder exploitation.

How Does Consumers’ Self-Control Predict Financial Behavior and Financial Resilience?

This paper examines the association between self-control and consumer financial resilience. Applying Partial Least Square Structural Equation Modelling (PLS-SEM) on data sourced from the Consumer Financial Protection Bureau (CFPB), our study shows that along with the demonstrated direct relationship between self-control and consumer financial resilience, the benefit of financial practice through daily management plays a key mediating role, positively impacting consumer financial resilience. Leveraging the economic theory of the Behavioral Life-cycle (BLC) Hypothesis, our results suggest that the benefits of self-control on financial resilience largely depend on the cultivation of positive financial actions, which are reinforced through active financial management.

Feasibility of Constructing an Interactive Mapping Tool to Visualize Sickle Cell Disease Geographic Distribution and Medical Care Utilization in the United States

Introduction: It is recognized that many people living with sickle cell disease (SCD) face significant structural obstacles to establishing and maintaining long-term hematology care. For example, some people with SCD care may lose access as a result of a geographic move; others may lose access by aging out of the pediatric care setting. These scenarios could be addressed by providing resources in areas with addressable populations and unmet medical need. However, deploying SCD treatment resources is frustrated by the lack of an established tool that can estimate the number of people living with SCD or gaps in services available in a given geography. We hypothesized that we could build a tool using a combination of publicly available demographic data combined with hospital claims data. Methods: Using CDC estimations for SCD affecting 1 in 365 African American and 1 in 16,300 Hispanic births, we estimated SCD prevalence based on data from the 2021 US Census, segmented by age, race, and county. We added a distinction between rural and urban counties using classification from the Consumer Financial Protection Bureau (CFPB), which designates rural counties as “a county that is neither in a metropolitan statistical area nor in a micropolitan statistical area that is adjacent to a metropolitan statistical area.”. PowerBI was used to generate a heat map to visualize the data at a state and county level, with the ability to filter by patient age and urban vs. rural designation. Finally, using hospital claims data for SCD “with crisis” (i.e., claims referencing ICD10 codes: D5700; D5701; D5702; D57211; D57212; D57219; D57811; D57812; D57819) and SCD “without crisis” (i.e., claims referencing ICD10 codes: D571; D5720; D5740; D5742; D5744; D5780), Pearson correlation was used to determine if an association existed between our estimated SCD prevalence and SCD related hospital claims for claim years 2021, 2022 and partial 2023. Results: Our model estimates a total of 127,297 people living with SCD in the United States, with 97% (123,454) being Black and 3% (3,843) being Hispanic (Table 1). 88% (111,977) were predicted to be under age 65, and 28% (35,675) were predicted to be under age 19. The majority (95%, 120,875) lived in urban counties. Most rural counties with SCD patients are located in the South and Southeast US (Figure 1). There was a strong positive correlation between our predictions of SCD prevalence at the state level and SCD-related hospital claims (coefficient of 0.903217 [95%CI: 0.944-0.836], p<0.001). For claim years 2021, 2022 and 2023 (partial) there were 1.6 claims per 1 SCD patient across the United States. While there were 1.6 claims per patient in urban counties, there were 0.7 claims per 1 patient in rural counties, consistent with a relative lack of access to care in rural areas compared to urban areas. Conclusions: Although not a direct measurement, and possibly overestimating the number of people >age65 living with SCD, our estimate suggests that there may be several thousand more people living with SCD than what is generally believed (100,000 per US CDC). Our estimates are partially validated by our finding that hospital claims data correlate strongly with our estimates of SCD prevalence at the state level. Although only a relatively small population of people living with SCD reside in rural counties, lower utilization of hospital services, as measured by hospital claims data, suggest that rural populations may have an unmet medical need that is particularly striking. Although working with claims data and disease estimates based on census data introduces significant limitations, it is feasible that this type of analysis could help to direct resources to areas with greatest unmet medical need.

How can regulators affect corporate social responsibility? Evidence from regulatory disclosures of consumer complaints in the U.S.

Regulators are increasingly seeking ways to incentivize firms to improve corporate social responsibility (CSR) while minimizing criticism of direct interventions in firm behavior. This study takes advantage of two exogenous regulatory shocks initiated by the Consumer Financial Protection Bureau (CFPB) in the US. In 2011, the CFPB enabled the private filing of consumer complaints against financial firms, and in 2013, these complaints were publicly disclosed. Our findings reveal a positive association between consumer complaints and subsequent CSR performance of the targeted financial firms (referred to as focal firms). Notably, this association becomes significant only after the public disclosure of complaints. Furthermore, we observe a spillover effect on the CSR performance of non-focal firms operating in the same area as the focal firms. Collectively, these findings suggest that mandatory disclosure of consumer complaints is one effective regulatory strategy to motivate both focal and non-focal firms to enhance their CSR performance.

The Auditor’s Responsibility for Noncompliance with Laws and Regulations: A Case of Unauthorized Account Activity at Wells Fargo

ABSTRACT In September 2016, the Consumer Financial Protection Bureau (CFPB) announced an enforcement action against Wells Fargo related to improper sales practices. Following investigations revealing widespread abuse by thousands of employees (e.g., opening deposit and credit accounts without customer consent), Wells Fargo paid civil monetary penalties of $185 million and other substantial punitive fees and fines. This case study uses this real-world example to explore the influence of materiality on the scope of an audit, the auditor’s responsibility for detection and communication of noncompliance with laws and regulations (NOCLAR), and the auditor’s consideration of the control environment in the evaluation of internal controls over financial reporting (ICFR). After completing the case, learners are able to discuss relevant professional standards and recognize the impact of materiality considerations on decisions about financial statement misstatements, NOCLAR, and internal control deficiencies. JEL Classifications: M41; M42.

A Comparative Assessment of Alternative Dispute Resolution for Financial Consumer Protection in Malaysia and Indonesia

The Ombudsman for Financial Services (OFS) handles financial services complaints in Malaysia. Meanwhile, the Alternative Institution for Dispute Resolution in the Financial Services Sector (LAPS SJK) handles financial disputes and safeguards customers from financial fraud in Indonesia. This study aims to analyse and compare the legal framework in both institutions for protecting financial consumers, considering their similarities and differences in regulatory approaches, consumer rights, and enforcement mechanisms. The findings of this study can provide insights for policymakers and regulators in both countries to enhance their efforts to safeguard the interests of financial consumers.

IMPORTANCE OF FINANCIAL SERVICES’ TRANSPARENCY AND THE FINANCIAL EDUCATION FOR THE PROTECTION OF CONSUMER RIGHTS IN GEORGIA

George Gavtadze 
 Email:george.gavtadze@atsu.edu.ge
 Professor, Akaki Tsereteli State University 
 Kutaisi, Georgia
 https://orcid.org/0000-0001-6080-0163
 Aza Iphshiradze 
 Email:a.iphshirdze@unik.edu.ge
 Professor, Kutaisi University 
 Kutaisi, Georgia
 https://orcid.org/0009-0005-8373-3043
 
 Abstract. The issues of financial services’ transparency, consumer rights protection, financial education are relevant and the feasibility of their study is determined by the features of social-economic development. To overcome the problem, to some extent, it is possible to create and develop regulatory schemes for the protection of consumer rights. As research shows, priorities and practical implementation of consumer rights protection differ from country to country. The regulation is mainly aimed at providing complete information about the product to the consumer. However, in addition to imperative regulatory norms, in developed countries, the existence of self-regulation mechanisms, such as codes of conduct, is also of great importance.
 Despite the adoption of a number of laws and legislative acts, creation of regulatory documents, etc., in terms of further improvement of consumer rights protection, at the modern stage, the greatest emphasis is still placed on financial education and raising consumer awareness. Consumer rights protection and financial education are two sides of the same coin and serve the same purpose.
 For more than a decade, many countries have been implementing projects aimed at raising the level of financial education, which, for the most part, is manifested in the development of a national strategy for financial education. It should be noted that the need to develop a national strategy is often coupled with consumer financial protection and financial inclusion measures. At the same time, it should take into account and be adapted to the needs and shortcomings of a specific country.
 As a result of the analysis of the current situation, we can conclude that the improvement of financial services, the protection of consumer rights and their financial education can bring significant benefits not only to individuals or groups of people, but also to the country as a whole (both developed and developing).

Consumer complaints of consumer financial protection bureau via two-stage residual one-dimensional convolutional neural network (TSR1DCNN)

The Consumer Financial Protection Bureau (CFPB) is a government body responsible for safeguarding consumers from financial fraud and abuse. Managing customer complaints is one of the key tasks undertaken by the CFPB. However, the sheer volume of complaints received can overwhelm the bureau's resources, hindering prompt and efficient resolution. To address this challenge, we propose a novel approach called the Two-Stage Residual One-Dimensional Convolutional Neural Network (TSR1DCNN) to optimize the processing of consumer complaints at the CFPB. In this study, we conducted comprehensive experiments, including Ablation Experiment 1 (AE1) and Ablation Experiment 2 (AE2), to evaluate the effectiveness of our proposed TSR1DCNN model. AE1 involved removing the first Conv1D layer, while AE2 removed the Batch Normalization layer. These experiments allowed us to assess the impact of removing specific components on the overall performance of the model. Furthermore, we compared our TSR1DCNN model with other popular deep learning architectures, including 1DCNN, LSTM, and BLSTM, to provide a comprehensive analysis of our proposed approach. Using a dataset of 555,957 consumer complaints received by the CFPB, we trained and tested the TSR1DCNN model, as well as the ablated versions in AE1 and AE2, alongside the 1DCNN, LSTM, and BLSTM models. The results showed that the TSR1DCNN model achieved an impressive accuracy of 78.07% on the training set and 76.53% on the test set. In comparison, AE1 achieved an accuracy of 69.63% with a loss of 1.1207, while AE2 achieved an accuracy of 71.00% with a loss of 1.0583. The performance of the TSR1DCNN model outperformed the other deep learning architectures, including 1DCNN, LSTM, and BLSTM, indicating its superiority in handling consumer complaints effectively. These results demonstrate the superiority of the TSR1DCNN model over the ablated versions in AE1 and AE2, as well as its superiority over other commonly used deep learning architectures. By incorporating advanced neural network architectures such as 1DCNN, LSTM, and BLSTM, and considering the specific modules where our proposed method operates, we provide a promising solution for enhancing the efficiency and effectiveness of complaint-handling processes in organizations facing a large volume of complaints, such as the CFPB.

Rethinking Financial Consumer Protection Measures for Elder Customers

Rethinking Financial Consumer Protection Measures for Elder Customers

The Law and Economics Perspective of Financial Consumer Protection Laws and Regulations: Focusing on the Application of Behavioral Economics

The Law and Economics Perspective of Financial Consumer Protection Laws and Regulations: Focusing on the Application of Behavioral Economics

The Effect of Financial Services Authority Regulatory Implementation Concerning Financial Consumer Protection on Banking Financial Performance

Many parties engage in banking as the financial services industry grows, particularly in Indonesia. To keep banks safe, financial services must emphasize customer protection. The Financial Services Authority (OJK), Indonesia's financial services regulator, implemented several consumer protection measures. The policy may hurt banks despite protecting customers. Consumer protection laws strengthen banks. Proper protection would make clients feel safer and increase bank trust. Banks with strong consumer protection regulations will attract more clients since customers will feel safe doing so. This study examines how the OJK regulation's implementation on financial services consumer protection affected national commercial banks' financial performance from 2017 to 2021. This study adopts descriptive and verifiative approaches to analyze 93 national commercial banks in Indonesia from 2017 to 2021. The research utilizes secondary data from the Financial Services Authority (OJK) and bank financial statements. The investigations done have led to the conclusion that implementing consumer protection can improve bank financial performance and lower credit risk