Menu

CFPB's Project Catalyst Highlights Innovation Opportunities

Consumer Finance   |   Financial Services Regulatory   |   Life Insurance & Financial Lines   |   October 26, 2016
Download   
Share Page

On October 25, the Consumer Financial Protection Bureau (CFPB) released its "Project Catalyst Report: Promoting Consumer-Friendly Innovation." ("CFPB Report"). The CFPB Report reviews what the CFPB "has learned about a range of marketplace developments that may hold the potential for consumer benefits" impacting underserved consumers. Insurance companies may be able to address the same issues and provide similar benefits through innovation.

Consumer Saving

One issue the CFPB aims to understand is how to promote saving among consumers. In collaboration with the CFPB, American Express tested several strategies to encourage consumers to set money aside in a savings account, "including marketing via email or direct mail, with messages touting the benefits of saving, and a $10 financial incentive for meeting a savings goal of $150 within three months." Key findings of the program were: (i) simple methods of encouraging consumers to set aside funds were effective, (ii) offering even a small financial incentive for meeting a savings goal within a period of time increased savings by over 100 percent, and (iii) savings continued even after the program ended. These findings reflect that consumers can be encouraged to increase retirement saving. Encouragement could take the form of regular consumer engagement as well as a bonus or other incentive to consumers for incremental savings over time.

Cash Flow Management

The CFPB is also focusing on the challenge consumers face from mismatches in the timing of cash flows due to uneven or unexpected changes in their income and expenses. Several FinTech companies are "developing various tools to help address this mismatch or time lag between expenses and income." Innovations include tools to: (i) facilitate access to accrued wages earlier than the regular payday, (ii) smooth a consumer's income by allowing the consumer to put aside earnings from above-average pay periods to supplement earnings from below-average pay periods, and (iii) deduct a portion of consumers' wages in order to apply the funds to a consumer's recurring payments. While these cash management tools focus on income from earnings, similar tools may be effective for retirement income planning by allowing retirees to match the timing of expenses due with income from their retirement products.

The CFPB Report reflects opportunities for insurance companies to develop tools and products that encourage retirement savings and help retirees take income from their retirement assets in a manner that matches their expense patterns.

Innovation


©2018 Carlton Fields Jorden Burt, P.A. Carlton Fields practices law in California through Carlton Fields Jorden Burt, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.