Prepared Statement of The Federal
Trade Commission on Financial Literacy
And Consumer Education
Senate Committee on Banking, Housing, and Urban Affairs
July 29, 2003
Mr. Chairman and members of the Committee, my name is Joel Winston. I am Associate
Director for Financial Practices at the Federal Trade Commission ("Commission" or "FTC"). The
division I head is responsible for enforcing the various consumer credit laws subject to the
I am pleased to appear today to discuss "financial literacy," both generally and as it relates to
the Fair Credit Reporting Act ("FCRA"). This is a topic of critical importance, especially because the
FCRA relies on the vigilance of consumers in protecting their own rights. Our economy operates most
efficiently when consumers understand the credit system so that they can make the best decisions about
I. The FTC's Consumer Education Program
The Commission has undertaken significant efforts to educate consumers about financial matters
generally and credit issues specifically. Consumer education is among our most important tools in the
fight against fraud and deception, because consumers are their own first line of defense. Through our
Division of Consumer and Business Education, we continue to develop creative and effective ways of
reaching consumers to arm them with the information they need. We have over 30 publications related
to consumer credit topics, ranging from advance-fee loans(2) to vehicle financing.(3) These publications are
available directly from the FTC and through a variety of partner organizations and the Federal Citizen
Information Center in Pueblo, Colorado. All these materials are on the Commission's Web site at
www.ftc.gov. Credit publications have consistently been among the Commission's most popular items.
Last year, we distributed about 2 million credit-related brochures in print, and consumers accessed
these publications on the Commission's Web site another 1.5 million times. Twelve of our credit
publications are available in Spanish, and more are in the translation pipeline.
Both at our headquarters here in Washington and in our regional offices, we have partnered
with many outside organizations to improve financial literacy. For example, our Northeast Region
works with colleges and universities in an effort called "Project Credit Smarts," in which we make
presentations and distribute credit-related publications during student orientation sessions. We have
similar working relationships with organizations such as the Jump$tart Clearinghouse, the American
Savings Education Council, AARP, the Consumer Federation of America's Consumer Literacy
Consortium, the National Consumers League, and the Department of Defense. We also distribute
financial education materials at national meetings of the NAACP, National Urban League, National
Council of La Raza, and the League of United Latin American Citizens, among others.
When the Commission takes law enforcement action, it strives to combine it with an educational
effort. Each action comes with a press release and outreach efforts to consumers. Many cases are
accompanied by a consumer education publication that re-emphasizes the messages consumers should
take away from the case.(4)
Our identity theft program is another important way in which we educate consumers about
credit matters. One of the most devastating consequences of identity theft is the damage that it causes
to the victim's credit record. As you know, Congress designated the Commission to operate the
national clearinghouse for ID theft complaints. We offer publications with tips on how to avoid identity
theft and what to do if it happens. Last year, the Commission distributed about 1 million ID theft
publications and registered an estimated 2 million hits to our ID theft Web site.
There are many sources of financial education materials throughout government and the private
sector. For example, the National Endowment for Financial Education, a non-profit foundation,
provides funding, support and expertise to develop financial literacy programs for the public. The three
major credit bureaus and Fair, Isaac & Co., a major developer of credit scores, all operate Web sites
with useful information about credit reports and scores.
II. Consumer Education and the FCRA
Unfortunately, many consumers have limited knowledge of our credit reporting system. They
may not realize that information about their financial history is compiled and sold, not just to creditors,
but also to employers, insurers, landlords, utilities, and others who use it to make decisions. Consumers
may not know what information is reported about them, who uses it, and for what purposes. They may
not understand how that information affects their ability to get a loan, insurance, or a job, and what
rights they have to ensure that the information is accurate. Uninformed consumers may not take the
steps they should to improve their credit ratings or correct errors. Improving financial literacy may not
by itself ensure that consumers are successful in using our credit system, but it's certainly a key
It also is important to remember that the FCRA itself serves an important educational function.
The FCRA mandates that information be made available to consumers in many different contexts.
Perhaps most important, the law requires that lenders and other users of credit reports notify consumers
when they take "adverse action" based on information from a credit report. The notice must tell
consumers that the action was based, in whole or in part, on information in a credit report. The notice
also must disclose which credit bureau supplied the report, and advise consumers of their rights to a
free copy of the report and to dispute the accuracy of the information in it. This notice puts credit
reports in consumers' hands when they are the most motivated to act on it - that is, after they have
been denied credit, insurance, employment, or benefits based on the report.
Consumers receive additional information when they obtain credit reports from the bureaus,
whether in response to an adverse action notice or otherwise. In 1996, Congress mandated that the
bureaus send with the report a copy of a document called a "Summary of Consumer Rights." This
summary briefly describes the FCRA and explains the consumer's rights under the statute, and directs
consumers to the FTC's Web site, which has extensive information about the FCRA and other credit
laws, and to the Commission's toll-free telephone helpline.
The Commission's legislative recommendations, about which Chairman Muris testified before
this Committee on July 10, would result in better-educated consumers.(5) Our proposals would put more
information in consumers' hands by (1) expanding consumers' right to adverse action notices when they
are offered less favorable credit terms; (2) making annual credit reports available at no charge, and (3)
giving consumers more information about their credit scores along with explanatory materials.
The Commission's proposals also would empower consumers to act on this improved
information by streamlining the dispute process. For example, the Commission supports an
amendment that would require resellers of consumer reports to submit disputes to the originating
repository to investigate these disputes.(6) In addition, the Commission believes that the law should be
amended to require furnishers of information to investigate consumer disputes when the consumers
contact them directly.(7)
Thank you for the opportunity to discuss the Commission's efforts in the area of financial
literacy. I will be happy to answer any questions you may have.
1. The views expressed in this statement represent the views of the Commission. My oral
presentation and responses to questions are my own and do not necessarily represent the views of the
Commission or any Commissioner.
2. "Easy Credit? Not So Fast. The Truth About Advance Fee Loan Scams"
3. "Understanding Vehicle Financing" (http://www.ftc.gov/bcp/conline/pubs/autos/ vehfine.pdf).
4. For example, the Commission's announcement of its settlement with Mercantile Mortgage Co.
included consumer education regarding home equity loans. See
5. See Testimony of Timothy J. Muris Before the Senate Committee on Banking, Housing, and
Urban Affairs, July 10, 2003 (http://www.ftc.gov/os/2003/07/fcrasenatetest.htm).
6. See id. at 10.
7. See id. at 15.