Today, we held a forum on access to checking accounts in Washington, D.C. The live event has now ended. The event featured remarks from Director Richard Cordray, as well as presentations from consumer groups, federal and local government officials, and industry representatives. We aim to learn more about how the screening system works and how to improve the information and products that are available for consumers.
A recording of the forum will be available here soon.
Access to checking is important
Many people view checking accounts as an important step towards financial stability and economic mobility– particularly for low-income and economically vulnerable households. However, more than ten million households in America are unbanked , meaning they do not currently have a checking account.
Checking accounts provide: a secure way for consumers to:
- deposit their paychecks,
- make payments,
- transfer and hold money, and
- manage household finances.
Checking accounts can also be an entryway to other financial services like savings accounts and credit products. This can ultimately enable access to longer term financial goals such as auto-and home ownership. Checking accounts often enhance financial capability, upward mobility, and the building of wealth.
Although new financial service products, such as prepaid cards, are becoming more popular and affordable, checking accounts typically offer more features and payment options. As a result, households without checking accounts often spend more time and money managing household finances and meeting day to day obligations than those with checking accounts.
Consumers who struggle to pay their bills each month or who have problems managing their checking accounts risk overdrawing them. This frequently results in stiff penalties. We found that the median overdraft fee was $ 34 in 2012. Overdraft and non-sufficient funds (NSF) fees account for the majority of checking account fees charged to consumers. These fees quickly add up and consumers who are unable or unwilling to repay what they owe end up losing their accounts. This can have serious consequences for consumers, affecting their ability to open a new checking account for several years. While some accounts are closed because of fraudulent behavior, most are closed due to overdrafts.
Some initiatives intended to help consumers gain or regain access to basic checking accounts cite that having a negative “hit” on a checking account screening report is a primary barrier to getting an account.
How the system works
Many banks and credit unions rely on reports provided by specialty consumer reporting agencies (CRAs) to determine whether to open a checking account for new customers. These specialty CRAs collect information on consumer check writing and account history from financial institutions, including whether a consumer has had a previous account closed. The information may include a record of bounced or returned checks and overdrafts. It is used by financial institutions to decide whether to offer a checking account to consumers, and what kinds of restrictions to place on the account. Policies on what is reported and how it’s reported vary among financial institutions. This makes it difficult for consumers to determine which of their previous account problems might disqualify them for an account.
Learn about issues and roles
At today’s forum, we’d like to shed light on a few things, including:
- Issues consumers face when trying to regain access to a checking account
- The role that Credit Reporting Agencies and financial institutions play when consumers apply for a checking
account - Data used as part of the account opening decision
- How institutions set their risk tolerances
- Definitions of fraud and improper account usage
We also hope to identify some potential next steps, including:
- How to increase the accuracy of data furnished to and reported by consumer reporting agencies
- How institutions can use various screening tools to manage risk without unnecessarily excluding potential accountholders
- How institutions can tell consumers about their right to know what’s in their account histories and correct any inaccuracies
- How consumers can access different account products that meet their needs
Continue Reading
Today, we’re releasing our third Snapshot of Complaints Received from Servicemembers, Veterans and their Families. The report details the data and trends from consumer complaints we’ve received from members of the military community since July 2011.
Here are just a few highlights:
- Debt collection complaints have continued to rise since our last report, and now make up 39 percent of total complaints. It is our largest category of complaints from the military community.
- Credit reporting remains a top category of concern. 72 percent of these complaints are about incorrect information on credit reports. This remains a significant issue for the military community, one that we highlighted earlier this year.
- Student loans are another concern. 49 percent of these complaints are about problems dealing with a lender or servicer. In these complaints, we continue to see long-standing trends, such as servicemembers complaining about not being provided their Servicemembers Civil Relief Act rights.
This year our report also highlights our outreach efforts that allowed us to connect with thousands of members of the military community, as well as three of our enforcement actions that recovered millions of dollars for affected consumers, primarily servicemembers, veterans, and their families. These figures represent the positive impact of the work we continue to do on behalf of those who serve.
Problems with account services
Basic account servicing stands out as a significant area of concern for servicemembers. Most consumers can call their financial institution, visit a branch, or connect online to try and get the help they need to maintain their account. Unfortunately, for military personnel and their families, the realities of military life, including deployments, frequent moves, and a high operational tempo, can sometimes make access to those services extremely challenging.
We found that servicemembers were often subject to a variety of account maintenance or penalty fees, as well as account-access restrictions, which were triggered due to aspects of their military service.
These problems raise concerns that financial institutions may not have a true understanding of the servicing needs of their military customers and may lack proper procedures and protections for them. Detailed examples of servicemember experiences can be found in Section II of the report.
Check out the snapshot to learn more.
We’re listening
As always, if you have a problem with a consumer financial product that you can’t resolve on your own; or if you know someone in that situation, please remember that you can submit a complaint online or by calling (855) 411-2372. We make your voice heard.
