2014 State of the Credit Counseling and Financial Education Sector. Delivered by Susan C. Keating. President and CEO

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1 2014 State of the Credit Counseling and Financial Education Sector Delivered by Susan C. Keating President and CEO National Foundation for Credit Counseling 49 th Annual Leaders Conference Seattle, Washington September 29, 2014

2 The New Face of Poverty Members of the National Foundation for Credit Counseling have a rich history of helping millions of Americans every year. During and shortly following the financial crisis those numbers soared as families struggled to stay in their homes, pay back debt, and put aside savings. In the aftermath of the Great Recession, millions are still recovering and in dire need of financial guidance and education. Those consumers profile, expectations, and dreams have changed however, and in unforeseen ways. Directed by consumer research and with the help of its members, the Board of Trustees and other stakeholders, the NFCC is enhancing its services to meet those changing needs. How many of us have a family member, a close friend, or even a neighbor who s been left behind in the recent economic recovery? Although unemployment numbers are improving, too many hard working and skilled people are still looking for jobs, or better jobs. Many others are facing big hurdles to simply stay even due to medical or student loan debt. Still others are working, but are just a paycheck or two away from financial disaster. In many respects, America s Main Street of old has become The New Face of Poverty. What does the new face of poverty look like? It s millennials who ve moved back home because of student loan debt, or limited job prospects. It s military service members and female heads-ofhouseholds trying to make ends meet. It s the growing community of Latinos and Hispanics; many new to our country who need tools and information to help them succeed financially. Then there are the struggling baby boomers, or those who wish they could retire, worried about their financial future. These changing consumer demographics reflect trends in the U.S. economy since the 2008 financial crisis that need to be considered, and the NFCC is doing just that. Some trends are encouraging. Unemployment, bankruptcy filings, mortgage delinquencies, and foreclosures are at their lowest levels since Credit card delinquency rates and debt remain at near historic lows. And the personal savings rate is finally over 5 percent again. But all too many trends remain concerning. Unemployment is still a challenge for many, particularly young people and African Americans. More than 3.5 million Americans have been out of work for six months or longer. The median annual income is 6.6 percent - lower than it was in At $1.2 trillion, student loan debt is the second-largest form of consumer debt after mortgages. And with more than 7 million borrowers in default, about half that debt isn t being repaid right now.

3 Fifty-one percent of workers have no private pension coverage, and 34 percent have no savings set aside for retirement. For those over 65, Social Security benefits represent about 38 percent of their income. For a quarter of elderly beneficiaries, this is their sole source of income. These trends point to a need for new and expanded financial education tools and services that recent NFCC surveys confirm: Sixty-one percent of U.S. adults admit they don t have a budget. A third carry credit card debt from month-to-month. And 16 percent say they don t have enough savings set aside for unexpected emergencies. Our surveys show that trends among military service members are even more troubling. Seventyseven percent worry about their finances. Fifty-eight percent don t pay off their credit card debt each month. And 55 percent feel unprepared for a financial emergency. About 1 in 5 U.S. adults are not sure about what types of information are included in a standard credit report, and 65 percent haven t looked at their credit reports in the past year. When asked to grade themselves on their knowledge of personal finance, 41 percent of Americans give themselves C, D, or F. The trends are clear: With continuing economic challenges and without a solid foundation of knowledge on which to base everyday financial decisions, many are having a tough time rebuilding their financial lives after the Great Recession. And they re hungry for information and practical guidance on how to do it. To us at the NFCC, the solution is clear: We need to enhance and innovate our services to address the new realities. We need to offer new practical tools, and targeted comprehensive education to help consumers manage their finances today, and prepare for a better tomorrow. With leadership from the NFCC Board of Trustees, the NFCC has developed a new three-year strategic plan designed to reach those who are struggling to get to a better financial place, and who can benefit from the professional delivery of services relevant to their unique circumstances. Task Forces led by Board and Operating Committee members have been meeting throughout the year, and have developed strategies in four key areas: membership expansion, branding and marketing impact, new segment services including student loan debt, retirement at-risk, military veterans, single women, and the Hispanic/Latino community and operational excellence. Through the NFCC s Membership Subcommittee, a carefully selected group of high-quality nonprofit financial counseling organizations have been identified who would benefit from the value the NFCC offers, and who would help further enhance our national reach and overall impact on consumers. We envision membership growth to expand over the next several years.

4 We do however need to stay mindful that times are challenging for the financial counseling sector including members of the NFCC. We will likely see further agency consolidation as a result of the changing demographics and community needs. Consumers will also continue to need guidance on who to trust and where to go for quality assistance. Leading change, clarity in messaging, active partnership development, and cross-sector collaboration, as well as improved efficiencies and operational excellence are key to our future. In times where fewer people are reaching out to counselors, effective communication and synchronicity between national and local community-based activities is critical. The Marketing Task Force has been working to identify opportunities to leverage marketing dollars between national and local efforts to affirm NFCC members as the go-to experts in financial education and wellness. Social media outreach and brand alignment between the NFCC and our members will play an increasingly important role. As we direct our efforts to specific consumer segments, the student loan arena is one that needs creative and innovative solutions given the severity and complexity of the problems. Through the work of the Student Loan Task Force, the NFCC will expand its gold-standard level of counseling and coaching services by providing additional training and resources to counselors so we can better reach a demographic that is underrepresented today, and having a tough time navigating the current economic climate. For baby boomers, the Retirement Task Force has modeled a Retirement-at-Risk Program that incorporates assessment tools, counseling, and retirement planning education. This vulnerable population is not only still trying to recover from the financial losses that their retirement portfolios took during the financial crisis, but they are now faced with the prospects of having their adult children move back home due to either the lack of finding adequate employment, or any employment at all. Another segment we need to remain focused on is the military. The number of military families facing financial distress continues to rise. The NFCC has forged a unique effort to make quality financial education accessible to all service members, veterans, and their families. Utilizing the Hands on Banking for Military financial education program created by the Wells Fargo Foundation, the NFCC and our members have been reaching out to deliver workshops and financial reviews to the military audience across the United States. We ve also recently been selected to participate at the Department of Defense Financial Readiness Roundtable, a select group of government agencies and nonprofit collaborators with a mission of promoting financial readiness to service members and their families. Although there are unique challenges with providing financial education to the military we will continue to serve them because we know it is the right thing to do.

5 We are pleased to report that Sharpen Your Financial Focus TM, our nationally driven grassroots initiative helping Americans stabilize their personal financial situations was launched, and is successfully up and running. Sharpen Your Financial Focus features a three-step process to improve consumers financial circumstances and behaviors: a financial stress test in the form of our MyMoneyCheckup online financial self-assessment tool; a customized one-on-one financial review to address immediate issues, and a choice of educational opportunities targeted to each client s needs. Since September 2013, more than 30,000 people have enrolled in the program. In partnership with financial services companies and NFCC members, we ve used media outreach to encourage consumers to take action through NFCC member agencies, and the response has been heartening. In conjunction with our strategic work, the NFCC is now working on Sharpen 2.0, a preventive, targeted, second-generation program that will combine financial assessment and counseling with individualized coaching and ecoaching tailored to the needs of specific consumer populations. Sharpen 2.0 is an exciting new venture building on the successes and learnings of this past year, while modifying the models to meet the changing needs of those our agencies are serving. What s new with Sharpen 2.0 is that after creating an action plan, the client will have access to personalized follow-up from a financial counselor or coach to track progress toward goals for up to a year. The client will also have access to ecoaching automated reminders by or text, and additional personal financial management tools directly tied to the action plan. Initially, we plan to target Sharpen 2.0 to student loan borrowers, military members, veterans and their families, and the 50-plus retirement-at-risk population Main Street Americans who now represent the new face of poverty. As we advance Sharpen Your Financial Focus and introduce Sharpen 2.0 at the national level, we encourage NFCC members to replicate these efforts at the local level. This is an important opportunity for members to reach out to banks and community partners within their markets to increase awareness, and conduct fundraising efforts so they can enhance their services and help more consumers. Although much progress has been made in addressing the serious housing problem in our country, there is still more work to do. As the premier provider of housing counseling services, we need to increase our efforts toward helping first-time homebuyers, and assist those who lost their homes during the recession return to the market while still actively serving those still at risk of foreclosure. We have received positive news on federal housing grants; receiving funding through the NFCC national intermediary totaling $3.5 million so far this year. We re also continuing our commitment to strengthen our compliance practices in response to increasing government requirements on federal housing grants. We re on track to complete 22 agency audits in 2014, similar to last year s total.

6 The NFCC remains the go-to resource for the media resulting in mentions in prominent outlets throughout the country, and we ve seen a continued momentum in our national communication outreach efforts in markets nationwide. Throughout the year, work has been underway to revamp and redesign our website, NFCC.org. Some of the new highlights will include: faster navigation so consumers can locate and connect with NFCC members more efficiently, a wider array of online resources and services such as student loan debt counseling and credit report reviews, and expanded FAQ sections. We re in the final stages of development, and plan to release the new site later this fall. Another major milestone for the NFCC and our members is that we re getting ready to put the Credit Solution Plan TM (CSP) into action. In development for several years, the CSP answers a critical need to restructure how the sector serves consumers. It offers a simple, effective set of solutions for clients with extensive debt along with quality financial counseling that enable them to work toward financial health over the long term. The CSP simplifies the process of putting eligible clients on repayment plans, expands and tailors solutions to meet the needs of today s consumers, and increases the successful completion of plans by implementing agency best practices. It s designed to expand the demand for holistic financial counseling as Americans adjust to a changing economy. It will also ensure the sustainable funding needed to allow agencies to continue providing essential client services. We ve collaborated with our members, financial partners, and other sector stakeholders to develop the CSP approach. This has been an all-hands-on-deck effort to fashion a workable solution that centers on the ultimate outcome of better service for consumers. And we re ready to move forward with implementation during the first-half of We ve had a good year with progress on many fronts, but we have much to do moving forward. We need to enhance the impact of the Sharpen Your Financial Focus initiative, and target our efforts to address the financial education and well-being of today s neediest Americans the new face of poverty. We need to ensure a successful roll out of the Credit Solution Plan to help consumers with extensive debt work their way out of it, and get on a better financial path. Most of all, we need our partners both traditional and new to join us and work with us to foster a healthier economy and better financial future in this country.