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CFPB Takes Steps to Improve Checking Account Access
Thursday, February 4, 2016 6:30 AM

CFPB Concerned that Screening Inaccuracies and Lack of Account Options are Keeping Consumers Out of the Banking System                                                                                                                                         

Tuesday, the Consumer Financial Protection Bureau took steps to improve checking account access amid Bureau concerns that consumers are being sidelined by the lack of account options and by inaccurate information used to screen potential customers.

The CFPB sent a letter to the 25 largest retail banks encouraging them to make available and widely market lower-risk deposit accounts that help consumers avoid over-drafting. The CFPB also issued a bulletin warning banks and credit unions that failure to meet accuracy obligations when they report negative account histories to credit reporting companies could result in Bureau action. Finally, the CFPB is providing consumers with resources to help navigate the deposit account system.

Almost nine out of 10 American households have at least one checking account, and many also maintain a savings account. In recent decades, technology has made it possible for consumers to access funds in their accounts in a variety of ways. One way that banks and credit unions screen account applicants for risk is to use information provided by checking account reporting companies, which have databases of information on involuntary closures of consumer checking accounts supplied by banks and credit unions.

Now the CFPB is warning banks and credit unions of their obligations when reporting. And while some banks and credit unions currently offer products that help consumers avoid overdrafts and other risks, the CFPB is also encouraging the industry more broadly to provide account options for consumers so they are less likely to overspend their funds.

View the letter sent to financial institutions.

Screening Accuracy Improvements

The bulletin issued by the CFPB warns banks and credit unions that they must have systems in place regarding accuracy when they pass on information, such as negative account histories, to checking account reporting or other credit reporting companies.

The CFPB is concerned about inaccuracies and inconsistent information provided by the financial institutions to the reporting companies. In a recent Supervisory Highlights, examiners found that one or more financial institutions failed to “establish and implement reasonable written policies and procedures regarding the accuracy of the deposit account information provided to the consumer reporting companies.” Examiners also found that at least one entity violated its federal obligation to handle consumer disputes about these issues.

Banks and credit unions should expect accurate information from checking account reporting companies to make fair assessments of deposit account applicants. If the system is tainted with incomplete, inconsistent, and inaccurate information, banks and credit unions cannot make informed decisions.

View the bulletin.

Empowering Consumers to Navigate the System

The CFPB released resources to encourage consumers to shop for lower-risk checking and prepaid accounts that will not authorize them to exceed their account balances. These products can help consumers maintain their accounts longer, and the banks and credit unions that offer them are often more accepting in their screening practices. The resources include tips and information about choosing an account and managing an account.

The CFPB also released a consumer advisory to help people know what to do if they have been denied a deposit account or have an involuntary account closure.

Read more on this CFPB announcement.