CFPB: Banks Off Balance About Checking Account Access

The Consumer Financial Protection Bureau (CFPB) is upset about consumer access to checking accounts, or more accurately, impeded consumer access to checking accounts--and has taken action to turn things around.

Earlier this week, the bureau announced in a bulletin that it has taken action to increase the odds that consumers receive fair treatment when it comes to opening checking accounts. The CFPB made the move in light of concern that incorrect information used by credit unions and banks to vet potential account-holders is in some instances preventing consumers from being granted checking privileges.

In its announcement, the bureau said it is informing financial institutions and credit unions of their risk of consequences should they fail to accurately report consumer account histories. Entities that send details pertaining to checking account problems to consumer reporting agencies could face "bureau action" if the information they share is inaccurate, the agency warned. Financial institutions and credit unions were informed that they need to have in place "reasonable written policies and procedures" to prevent errors that "could cause adverse consequences for consumers when included in a credit report," as well as effective procedures for handling investigations when consumers dispute negative reports.

The inability to open a checking account was cited as an example of these "adverse consequences" if errors--which might encompass anything from duplicate records to mistaking one customer for another because both individuals have the same name--were to be found in a credit report. Those financial institutions and credit unions that do not implement the above-mentioned effective procedures, the CFPB said, would be subject to "enforcement actions to address violations," with "all appropriate remedial measures, including redress to consumers," sought by the agency.

"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 press release issued when the bulletin was published.

Are the CFPB's threats empty ones? We would hesitate to say "yes."The agency has reportedly taken action against banks and credit unions for denying checking account access to some prospective account holders based on erroneous information.

Also part of the CFPB's move was the sending of a letter to the 25 largest banks, encouraging them to offer and promote "low-risk" accounts that do not come with overdraft protection. "People deserve to have more options for access to lower-risk deposit accounts that can better fit their needs," Cordray noted in the press release.

Of course, it is somewhat difficult to imagine that banks and credit unions will readily market low-risk accounts, given that overdraft fees contribute so heavily to their bottom line. The idea of carrying a glut of low-balance checking accounts likely will not sit well with them. It will be interesting to see if they take the bait.