The Financial Literacy Act Can Help
For quite some time now, financial education has been a fixture in the to-do list of public and private entities dealing with the crisis.
One may argue that in this area financial institutions have had a tendency to stay a step behind nonprofits and customer advocates. Had there been no crisis, the topic would not be as hot as it appears to be now.
The national awareness about financial education will improve for the long run if supported by a new piece of legislation designed to encourage financial institutions and businesses to provide free financial education. Rep. Eddie Bernice Johnson, D-Texas, recently introduced the National Financial Literacy Act of 2009, originally co-sponsored by Reps. Steve Cohen, D-Tenn., Elijah Cummings, D-Md., Bob Filner, D-Calif., Phil Hare, D-Ill., and Jim McGovern, D-Mass.
It is an incentive-driven proposition expected to require financial institutions, small businesses and corporations to provide financial education to their customers and employees. The bill will help stimulate the existing network of financial education providers by making it more competitive.
Lack of financial knowledge in recession times means every day Americans make costly financial missteps, Rep. Johnson said when she introduced the bill. "We must begin to see financial literacy as a necessity, and I hope to make financial education more accessible with the National Financial Literacy Act."
The bill allows for qualified community-based financial literacy programs to educate the public about saving for retirement, managing credit, long-term care, estate planning, predatory lending, identity theft and financial abuse schemes.
The National Financial Literacy Act of 2009 amends the Community Reinvestment Act and creates a financial education incentive for banks.
Under the bill financial institutions receive credit for offering community-based financial literacy programs, small businesses and corporations that offer free financial education receive preferential treatment for government contracts, and small businesses also receive tax breaks.
Rep. Johnson, who previously sponsored the National Financial Literacy Act of 2007 and the Employers Financial Literacy Act, maintains the new legislation incorporates both.
There is, however, a lingering doubt that even a well-designed bill may not take off in the marketplace as expected.
Meanwhile, until the bill turns into law, customer advocates continue to fill out the supply-demand gap, sometimes for a fee.
Consumer advocates like Ralph R. Roberts have already taken the rescue effort into their hands. The award-winning author and spokesperson for the Federal Loan Modification Center recently launched KeepMyHouse.com.
Mr. Roberts describes the new website as a community oriented source of information "that encourages the respectful exchange of ideas, opinions and advice about all things related to loan modification."
"I created KeepMyHouse.com as a resource to help Main Street navigate the complexities involved with loan modifications and to give them a place where they can connect with other homeowners involved in a similar situation," he said.
Consumer advocacy organizations like the Mortgage Modification Legal Network, founded by experts over 40 years ago, focuses on community outreach and homeowner counseling about debt settlement, loan modification and loss mitigation servicing.
"Homeowners are hungry for information and they don't know where to turn," said Gerardo Fernandez of Mortgage Modification Legal Network in a company release. "They don't know who to trust and more often than not, they fear communication with their lender about the significance of the problem. That is why we serve as the best and most efficient means to get homeowners in a payment they can afford."
MMLN has managed to make its outreach efforts more efficient through partnerships with churches. In January, Tempo Calvaro, one of the largest Hispanic, bilingual churches in the nation with over 6,000 congregants, partnered with MMLN to provide financial education to its members.