On February 3, 2016, the Consumer Financial Protection Bureau (CFPB) took a series of steps aimed at improving access to checking accounts for the nearly 10 million American households that are “unbanked” or which have no access to banking services. According to CFPB Director Richard Cordray, in prepared remarks delivered in Louisville, KY, the lack of access is caused—at least in part—by overdraft fees and credit screening inaccuracies.

First, the Bureau sent 25 large retail banks a letter urging them to offer and promote deposit accounts that avoid overdrafts and fees. Second it issued a compliance bulletin warning financial institutions that they must have adequate policies and procedures in place to ensure accurate reporting to consumer reporting agencies.  Third, it published a series of consumer resources guides designed to help improve checking account access.

Letter to the Banks

In his letter to the banks, Director Cordray claimed that the current banking practice of requiring consumers to pass “a standard screening process to obtain an account after identifying credit risks posed by the applicant’s history” unnecessarily excludes many consumers who may have made mistakes in the past, such as by misusing an account. Urging banks to change this practice, Cordray encouraged banks to offer these consumers low-risk deposit accounts that avoid overdraft fees. These accounts, according to Cordray, mitigate risk to the institution while allowing consumers basic access to the financial system. Cordray further recommended for institutions that already marketed “such accounts to feature them among their standard account offerings both in their branches and online.”  In his prepared remarks, Cordray explained that the CFPB does not view offering “safe banking products as idealism or mere charity,” but as a “hard-headed business judgment that takes the longer view and seizes opportunities to build sustainable customer relationships.”

Compliance Bulletin

In its first compliance bulletin of the year, the CFPB continued its theme of improving checking account access by reminding furnishers of credit information that failure to properly report information to credit reporting agencies (CRAs) can cause screening inaccuracies and adverse consequences for consumers including “being unable to open” a demand deposit account.

The Bulletin goes on to remind furnishers that Regulation V requires them to “to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information relating to consumers” when they pass on information to CRAs. This requirement not only includes the nationwide credit reporting companies but also specialty CRAs that focus on specific market areas and customer segments. Because the frequency, type, and nature of information furnished to CRAs can vary, the CFPB stresses that “institutions must consider the appropriate approach to each type of furnishing in its policies and procedures” and ensure that they have “such policies and procedures in place with respect to all information furnished.”

According to the CFPB, their current supervisory experience suggests that some financial institutions may not be compliant under Regulation V. The CFPB warned that “if the CFPB determines that a furnisher has engaged in any acts or practices that violate Regulation V or other federal consumer financial laws and regulations, it will take appropriate supervisory and enforcement actions to address violations and seek all appropriate remedial measures, including redress to consumers.”

Consumer Resource Guides

Lastly, the CFPB published three new consumer guides: (1) Selecting a lower-risk account; (2) Managing your checking account; and (3) Checking account denials. According to the CFPB, these guides will “empower consumer to navigate the system” and help consumers maintain their accounts longer.