State Financial Literacy Laws and Their Impact on Lenders

Financial literacy gaps in the U.S. have prompted states to enact laws requiring or encouraging financial education for borrowers, affecting lenders’ responsibilities and signaling a shift toward informed lending practices.

Financial literacy has long been recognized as a persistent gap across the U.S. consumer base. More recently, that gap has begun to receive formal attention from lawmakers, with several states introducing or passing measures that either directly require financial education at loan origination or signal heightened expectations for borrower understanding and preparedness.

While California’s 2020 mandate drew early attention, it is no longer an outlier. Instead, it represents part of a broader pattern of state‑level involvement that financial institutions should not overlook.

The Financial Literacy Gap in America is Wide

According to the TIAA Institute, on average, U.S. adults correctly answered only 49% of its financial literacy index questions in 2025.

In the same study, risk comprehension was the weakest point of U.S. adult financial literacy. Only 36% if adults answered related questions correctly.

lastly, the National Financial Educators Council (NFEC) reports that financial illiteracy cost Americans over $246 billion in 2025 alone.

California Set the Precedent for Financial Literacy Laws, but it’s Not Alone

California Code FIN 22304.5

Enacted in 2020, California Financial Code 22304.5 sits within the California Financing Law, the statutory framework governing non-bank finance lenders and brokers. Its primary purpose is consumer protection in small-dollar lending.

The law applies specifically to consumer loans between $2,500 and $9,999 made by licensed finance lenders, a segment historically associated with high costs and limited borrower understanding of credit consequences.

Subdivision (c)(2) contains the provision most often cited as a financial literacy mandate. Before disbursing loan proceeds, a finance lender must offer the borrower access to a credit education program or seminar. Key features of the requirement include:

• The program must be reviewed and approved by the California regulator (DFPI)
• The education may be delivered directly by the lender or by an independent third party
• The obligation is to offer, not compel, participation – borrowers may decline

The statute does not prescribe specific curriculum content in the code itself, but regulator-approved programs typically cover topics such as credit reports, credit scoring, repayment behavior, and long-term borrowing consequences.

Florida House Bill 1347

In 2024, the Florida Governor signed into law House Bill HB1347, mandating that borrowers receive free financial education when they originate a loan. This requirement as part of the law aims to enhance financial literacy among Floridians. It indicates a growing desire to require financial institutions to address the known financial literacy gap.

While your bank may not be affected by this law, now is a good time to assess what practices you have in place to help curb financial illiteracy gaps among your customers. Take note of the requirements if you lend online throughout the United States, and especially if you have any customers with a Florida zip code or phone number area code.

Florida’s approach helped establish a practical template for what legislatures may expect from lenders going forward.

California Education Expectations are Rising Even Earlier in the Lifecycle

California has taken additional steps towards financial empowerment for its borrowers. In 2024, the state passed legislation requiring high school students to complete a semester‑long personal finance course, beginning with the graduating class of 2030–31.

While this mandate does not apply directly to lenders, it signals a notable shift:

• Financial literacy is increasingly viewed as a foundational consumer protection
• Borrowers entering the credit market are expected to have baseline financial knowledge
• Institutions may face greater scrutiny if products or disclosures assume understanding that consumers demonstrably lack

Over time, California’s model reinforces the expectation that credit education should not be optional or incidental, particularly for first‑time borrowers.

Colorado, Texas, and Kentucky: A Consistent Legislative Direction

Across the U.S., state actions are converging around a shared premise that financial literacy is part of responsible lending.

Between 2024 and 2025, Colorado, Texas, and Kentucky each passed statutory financial literacy graduation requirements, significantly expanding the number of states with mandated personal finance education.

Up to this point:

• Approximately 30 states now require some form of personal finance education for high school graduation
• Several additional states have active or pending legislation
• Implementation timelines extend through the latter half of the decade

For lenders, these developments matter because they reinforce a regulatory narrative: financial decision‑making should be informed, documented, and defensible. Education is increasingly seen as a mechanism to achieve that outcome.

From Disclosure to Comprehension

Traditional compliance models have focused on disclosure delivery, ensuring the right documents are provided at the right time under frameworks like TILA and TRID. While those requirements remain unchanged, states are now implying that mere disclosure may not be sufficient if consumers cannot meaningfully interpret what they receive.

Financial education at origination helps bridge that gap by:

• Reinforcing key concepts such as credit scoring, repayment behavior, and long‑term cost
• Creating a documented moment of borrower engagement and acknowledgment
• Supporting fair lending and ability‑to‑repay principles without altering underwriting outcomes

Notably, structured education does this without increasing pricing risk or introducing product bias when delivered neutrally.

A Broader Standard is Emerging: Adopt Financial Education for Your Borrowers

Lenders that want to proactively mitigate financial illiteracy should partner with education providers to deliver high-quality, accessible and verifiable education to borrowers. You might already link to high-quality educational resources for your customers, and we applaud your proactiveness. However, doing it “by the book” is a little more involved. We lay out the exact parameters of Florida’s law below, which provides an appropriate standard for all lenders regardless of state regulation. Why? Structured education outweighs the costs and brings more value to the customer than a collection of disconnected financial literacy articles.

Why Offering Education to Customers Matters

The benefits of financial education for banks and borrowers goes beyond meeting legislative requirements. It’s a step in the right direction to:

• Reduce the incidence of loan default and financial distress among borrowers
• Suppress miseducation from social media influence that fuels frivolous disputes
• Increase awareness of responsible borrowing practices and the long-term implications of debt
• Empower individuals to make informed financial decisions, leading to greater financial stability and security
• Address the financial literacy gap across the USA
• Enable agents at the bank to improve their financial literacy and have more informed conversations with customers

Why Structured Financial Education Leads to Better Loan Outcomes

A 2023 peer-reviewed economics study in Germany found that increased financial literacy reduced the average mortgage delinquency rate by an average of 17% [source].

A randomized field study found that mandatory financial education for low-income households led to improved budgeting and prioritization of payments, better handling of housing finances, and fewer payment issues. These changes resulted in higher cure rates, faster delinquency resolution, and reduced servicing costs. [source]

A Free Financial Education Program Easily Absorbed into Your Lending Process

In collaboration with CBS Academy, we’re excited to offer online, on-demand credit health education for consumers and financial literacy training for call center agents. Our training covers the financial implications of key life events, the resulting effect on credit scores, and strategies to regain financial stability and credit health.

Our consumer education takes less than 10 minutes to complete, with knowledge checks along the way. Participants receive a downloadable completion certificate plus a suite of online resources to refer to, including a downloadable interactive budgeting tool. Also, it is priced at a highly competitive rate per consumer so that costs can easily be absorbed into existing origination costs.

Learn more about our financial education program and receive a free, no obligation trial here.