Symposium: Financial Resilience throughout Life Breakout session Thursday 21st of April 2016 Beurs van Berlage - Amsterdam

1. BREAKOUT SESSION
Promoting responsible use of
credit among young people
20 April 2016

2. |
Promoting responsible use of credit
among young people
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Moderator
Jim Stolze
Founder of TEDx Amsterdam, The Netherlands
Helen White
Head of Financial Capability, UK Money
Advice Service, United Kingdom
Minou van der Werf
Researcher at Nibud, The Netherlands
Janneke Ratcliffe
Assistant Director, Office of Financial Education,
Consumer Financial Protection Bureau,
United States of America
Ana Claudia Silva Leoni
Superintendent of Education at the
Brazilian Financial and Capital
Market Association
Lyndwill Clarke
Chairperson of the Consumer Financial
Education Technical Committee of the
Committee for Insurance, Securities and
Non-banking Authorities (CISNA), South Africa
Panelists

3. |
I. The problem
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4. |
Disclaimer
4
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
• Number of accounts fell 58% 2009-2014
5
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2009 2010 2011 2012 2013 2014
 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

6. US: Credit histories and scores
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
19-29 30-46 47-65 66+
Average Debt by Age
6
500
550
600
650
700
750
800
850
19-29 30-46 47-65 66+
Average Credit Score by Age
Experian 2012 data, scores are VantageScores. http://www.experian.com/live-
credit-smart/live-credit-smart-2012.html

7. |
One in five young adults
is over-indebted
Promoting responsible use of credit among young people7
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.

8. | Promoting responsible use of credit among young people8
Impulse buying is also more prevalent among
almost a third of young adults, higher than
other age groups
69
51
40
56
7
12
14
10
8
11
12
10
6
9
12
8
2
3
5
3
6
10
12
9
14%
22%
29%
20%
0 to 5 (does not sound like me) 6 7 8 9 10 (sounds a lot like me) 8 or more
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

9. | Promoting responsible use of credit among young people9
Reported debts over £20,000 – including student
loans – is highest among young adults at 11%
1
6
11%
6
2
8
6
6
8
23
16
19
11
14
13
13
4
3
4
4
65
36
41
43
Retirement age
Working age
Young adults
All UK 18+
£20,000 or more £10,000 - £19,999
£1,001 - £9,999 £101 - £1,000
£100 or less Nothing - I have no outstanding credit
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

10. |
61% of Brazilian households are
in debt
Source: CNC – National Confederation of Commerce, Services and Tourism
Peic: Consumer Debt and Default Survey10
Type of debt 2015
Credit card 76,1%
Store installment
purchases
16,9%
Leasing (car) 13,7%
Personal loans 9%

11. |
What grade would you assign to your financial life?
Source: SPC Brasil/Meu Bolso Feliz
*Young adults between 18 and 34 years old
11
What strategy do you adopt every month to
honor all your commitments?
Answers Young adults
between 18 and
34 years old
Pay some bills after their due date 22,4%
Take out loans and use the credit card or overdraft
limit to pay your bills 12,4%
Use savings to pay your bills 8,5%
1 10
Average*:: 6,2
1 to 3
10,9%
4 to 6
43%
7 to 10
46,1%

12. |
What are your main
expenses?
Radar Jovem, 2015 – B212
Technology (Smart phone,
Internet and pay TV) (55%)
What items do you
cut when you have
to save?
Entertainment (66%)

13. Awareness and Holding of Credit and Loan Products
56
60 62 62
65
63
59
35
44 44
42 43 42 42
0
10
20
30
40
50
60
70
16-19 20-24 25-29 30-34 35-49 50-64 65+
(0-100)AwarenessScore
Awareness of Different Types of Credit
and Loan Products
Formal Credit and Loan Index Informal Credit and Loan Index
o Awareness of different types of formal and informal credit and loans remains
fairly constant across age groups
o 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)
11
23
34
37
42
32
19
7
17
27
19
28
22 22
0
10
20
30
40
50
16-19 20-24 25-29 30-34 35-49 50-64 65+
%whohasonecreditandloanproduct
Holding at Least One Credit and Loan
Product
Formal credit and loan Informal credit and loan
HSRC Social Attitude Survey 2015

14. Self-reported indebtedness
9
15
23 23
26
19
17
0
5
10
15
20
25
30
16-19 20-24 25-29 30-34 35-49 50-64 65+
Percentage agreeing that they have too much
debt at present, by age group (2015)
Total agreement National average (20%)
Are there age group differences in levels of
self-reported indebtedness?
o 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
Minou van der Werf, Nibud15
Source: Nibud, 2014

16. |
Experience of debt
Minou van der Werf, Nibud16
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

17. |
II. Causes
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18. | To change this text choose menu Insert > Header and Footer18
• 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
– Lobola as a reason for delayed or deferred marriage (47% Men /
50% women – 16-34) – HSRC 2013
– Young men indebted early on life
Social Impact/Cause of debt

19. |
Causes of debt
behavior & financial upbringing
Minou van der Werf, Nibud19
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

20. |
III. Solutions
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21. |
Young adults and life transitions
Promoting responsible use of credit among young people21
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.

22. |
Near-to-peer is an approach
we tested
Promoting responsible use of credit among young people22
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.

23. |
+
Como Investir em Você (How to invest in you)
1
E A R N I N G
2
S P E N D I N G
3
S AV I N G
4
I N V E S T I N G
5
P L A N N I N G

24. |
Some results
Source: How to invest in you - ANBIMA24
• Program implemented in 2014
• It is currently available in 7 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

25. |25
Legislation/Regulation
National Credit Act - NCR
• Reckless lending
• Marketing prices and disclosures
• Agreements and quotes
• Enforcement
• Debt Councillors
FAIS Act - FSB
• Imposes requirements of FSP to ensure
that consumers get proper financial
advice
Financial Education
School Level Grades 7- 9 (13-15)
• Money in Action resource – Curriculum
Based – Money management
• Teacher training on use of resource
School level Grade 12
• School camps
• Face to face workshops
• Budgeting, Savings, Scams, Needs & Wants,
Debt, Retirement, savings & investments
University Student seminars
• Undergraduates
• Main challenge – debt management
• Presenting real life scenarios
• Information on rights and responsibilities
Community based
• Youth workshops – NYDA
• Money management
Interventions

26. |
Combining the best of two worlds
Effective (!) financial education & choice architecture
Minou van der Werf, Nibud26
Positive effect on financial knowledge and skills
questions, not on numeracy related questions
Drawback: no control group
Source: Nibud, 2014

27. |
Combining the best of two worlds
Effective (!) financial education & choice architecture
Minou van der Werf, Nibud27
Before 2009/2010 Before 2013/2014
After 2009/2010 After 2014/2015
Source: Van der Steeg & Waterreus, 2015