The Consumer Financial Protection Bureau announced in February it is taking steps to improve checking account access amid bureau concerns that consumers are being negatively impacted by a lack of account options and by inaccurate information used to screen potential bank 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 account overdrafts. The CFPB also warned 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.
“Consumers should not be sidelined out of the basic banking services they need because of the flaws and limitations in a murky system,” CFPB Director Richard Cordray said in a news release. “People deserve to have more options for access to lower-risk deposit accounts that can better fit their needs.”
In recent decades, more and more banks have introduced automated overdraft programs, according to the release. Becauses of these changes, banks have placed greater emphasis on screening new applicants for potential risks that may arise if a consumer exceeds his or her account balance.
While some banks and credit unions offer products that help consumers avoid overdrafts and other risks, the CFPB encourages the industry more broadly to provide account options for consumers so they are less likely to overspend their funds.
The CFPB urges banks and credit unions to offer lower-risk products that are designed not to authorize overdrafts and that do not charge overdraft fees. A number of institutions have introduced no-overdraft accounts and offer them alongside more common checking account products, but a recent CFPB review of the top retail banking websites found nearly half do not appear to offer any deposit account that ensures consumers cannot overspend. The CFPB also is concerned customers are often unaware about products designed to prevent account overdrafts, and urges banks and credit unions to feature such products prominently in their marketing efforts, their online and in-store checking account menus, and during sales consultations.
One way 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. In October 2014, the CFPB expressed concern about the accuracy of these reports, people’s ability to access the reports and dispute incorrect information, and the ways in which the reports were being used.
A 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 providing resources to encourage consumers to shop for lower-risk checking and prepaid accounts that will not authorize them to exceed their account balances. It also released a consumer advisory to help people know what they can do if they have been denied a deposit account or have an involuntary account closure.
For more information, see http://www.consumerfinance.gov/newsroom/cfpb-takes-steps-to-improve-checking-account-access/.