The Consumer Financial Protection Bureau is taking steps to improve checking account access because the bureau is concerned that consumers are being sidelined by the lack of account options and by inaccurate information used to screen potential customers.
The bureau sent a letter recently to the 25 largest retail banks encouraging them to make available and widely market lower-risk deposit accounts that help consumers avoid overdrafts.
The bureau 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.
In addition, the CFPB is providing consumers with resources to help figure out the deposit account system.
“Consumers should not be sidelined out of the basic banking services they need because of the flaws and limitations in a murky system,” said Richard Cordray, director of the bureau. “People deserve to have more options for access to lower-risk deposit accounts that can better fit their needs.”
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.
More and more banks have also introduced automated overdraft programs. As these changes have occurred, banks have placed greater emphasis on screening new applicants for potential risks that may come up if a consumer exceeds his or her account balance.
One way that banks and credit unions screen 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 bureau laid out concerns about the information 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.
With its actions, the bureau 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 bureau is also encouraging the industry to provide more account options for consumers so they’re less likely to overspend their funds.
In a recent bureau review of the top retail banking websites, it found nearly half don’t offer any deposit accounts that ensure consumers can’t overspend. These accounts would give consumers an opportunity to choose an account that helps them avoid overdrafts, Cordray said.
The bureau said it’s concerned that even when companies have these accounts available, consumers don’t know about them. So the bureau is also urging banks and credit unions to feature such accounts prominently in their marketing efforts, their online and in-store checking account menus, and when they meet with consumers.
