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1 1 (January 13, 2025)

handle is hein.crs/govesbb0001 and id is 1 raw text is: Congressional Research Service Inforrning the legislative debate sne1914 Updated January 13, 2025 Introduction to Financial Services: Consumer Finance Consumerfinance refers to the borrowing, saving, and investment choices that consumers and households make over time. Understanding why and how consumers make financial decisions is important when considering policy issues in consumer financial markets. These financial decisions can be complex and can affect long-term financial well-being. Congress may provide oversight or undertake legislation over consumer finance firms, including financial technology (fintech) and credit reporting. Congress provides oversight over the Consumer Financial Protection Bureau (CFPB), the primary federal regulator in consumer finance. Some Members of Congress have debated structural changes to the CFPB. Snapshot of Consumer Finances Households typically borrow money for the following reasons: * Asset building. Using credit (e.g., a mortgage or student loan) to invest in a home or an education can allow a household to build wealth over time. * Consumption smoothing. Using credit to buy and consume now and pay later (e.g., a credit card). * Financial shocks or emergencies. Using credit (e.g., a payday loan) to pay for unexpected expenses, such as a car or home repair, a medical expense, or a decrease in income. Total debt held by households has grown from $14.3 trillion at the beginning of the COVID-19 pandemic in 2020 Q1 to $17.8 trillion in 2024 Q2. According to the Federal Reserve Bank of New York, mortgage debt is by far the largest type of household debt, accounting for 70.3% of that debt. Auto loans (9.1%) are the second-largest component, followed by student debt (8.9%). Figure I. Household Debt Breakdown in 2024 Q2 Total Debt: $17.8 Trillion 2024 Q2 Mortgage ($12.52 T) Home Equity Lme of Credht ($0.38 T) Other ($0.54 T) Crdht Card ($1.14 T) ($1.59 T) T($1 63T) 2.1%9 6.4% 3.1%6 Source: Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit, 2024. While Figure 1 gives an aggregate breakdown of total consumer debt, Table 1 provides additional context on consumer finances. The median family has a net worth of $191,000, with $8,000 in transaction accounts such as savings and checking, while the median household makes $80,600 a year. Almost two-thirds (65%) of American households own their homes, with a median value of $340,000. A little over half (54%) of American families currently hold retirement accounts, with a median value of $87,000. To illustrate how Americans may handle financial stress, 54% of adults can cover three months of expenses using emergency savings, while 17% of all adults did not pay bills in full in the previous month. Table I. Key Statistics in Consumer Finances Statistic Amount Year Median family net worth Median household income Median amount in transaction accounts: savings, checking, etc. Homeownership rate Percentage of families holding retirement accounts Percentage of adults who did not pay bills in full in previous month Percentage of adults with the ability to cover 3 months of expenses from emergency savings $191,000 $80,600 $8,000 65% 54% 17% 54% 2022 2023 2022 2023 2022 2023 2023 Source: Federal Reserve Survey of Consumer Finances, American Community Survey, and Federal Reserve Survey of Household Economics and Decisionmaking. Regulation Consumers have a number of federal protections in the financial marketplace. Broadly, they fall into three categories: 1. Standardized consumer disclosures that help explain product terms. Standardized disclosures can also help consumers shop for the best terms, because all financial product terms are required to be disclosed in the same way. 2. Prohibitions against unfair, deceptive, or abusive acts or practices to potentially protect consumers against adverse product features or firm conduct.

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