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What initially appeared to be a listening session by a key federal regulator about access to checking accounts has sparked concerns that the agency may be seeking to go much further in dictating how and when banks open accounts for consumers.
October 27 -
Banks are transforming branches, rolling out new products and experimenting with alternative data, in an effort to bring more people into the financial mainstream. Such initiatives might have been a footnote in the past, but they have grown into a serious business strategy lately.
February 24
The New York attorney general's probe of the consumer reporting agency ChexSystems could wind up helping unbanked consumers get into the financial mainstream.
As it stands, unbanked consumers often can't open checking or savings accounts because they show up in ChexSystems' database as still owing overdraft fees on accounts that have long been closed.
But under pressure from
"We believe this will make it easier for consumers who might have been denied services based on their banking history to open checking or savings accounts at Santander," the bank said in a statement.
The probe by Schneiderman is part of a heightened regulatory focus on reporting agencies and, specifically, how inaccuracies in their reports can disproportionately impact lower-income consumers.
One of the criticisms of ChexSystems is that it only collects negative information about consumers' past banking history and doesn't take into account steps they may have taken to resolve problems.
"As a result, many consumers must resort to alternative banking services to carry out basic financial transactions like cashing payroll checks and paying bills services that cost them hundreds, if not thousands of dollars each year in extra fees," Schneiderman said in announcing the pact with Santander in February.
But some consumer advocates say that banks bear at least some responsibility for misreporting data.
Jonathan Mintz, president of the Cities for Financial Empowerment Fund says, for example, that if a consumer accumulates $90 or $120 in overdraft fees and decides to walk away from an account, one bank might report it as fraud, while another might report it as account abuse.
Anthony Gartman, president of AMG Consulting Group, agrees that much of the information ChexSystems reports is coming from banks themselves.
"It is pass or fail with ChexSystems, and unfortunately a lot of people that are reported to ChexSystems are for faults that didn't occur," Gartman says.
ChexSystems sent a statement, saying that it doesn't make the decision of whether to allow a consumer to open an account.
"ChexSystems seeks to receive and provide accurate information to banks to enable a client bank to decide whether it wants to accept a particular consumer as a bank customer," it said.
One of the areas of focus for the CFPB is to improve the data that is being given to consumer reporting companies to make it more nuanced and avoid a binary "yes or no" response. "This kind of assessment might provide greater access to the banking system," Cordray said during the forum.
Executive director of the National Consumer Reporting Association Terry Clemans said the work the CFPB is doing, especially as it relates to examining the data that is being collected and reported to consumer reporting companies, "is going to make drastic improvements in the consumer experience and in the consumer reporting industry in general."
Schneiderman is urging other banks to follow the lead of Citi, Capital One, and Santander and remove "unnecessary barriers to the financial mainstream" or else face more aggressive action. "No one should be denied a bank account because of a bounced check from years ago," he said.
