Bank Account Screening Tool Is Scrutinized as Excessive

June 16, 2014
New York Times 
Many banks use private databases to review customers' account histories and past financial activity in hopes of weeding out serial fraudsters. Regulators and consumer advocates, however, say banks also use this data to unfairly screen out potential customers, which increases the number of unbanked Americans.

New York Attorney General Eric Schneiderman is the first government authority to focus on how banks use the databases. His office is expected to announce that Capital One will agree to change its use of ChexSystems and to bar only those customers who are listed in the database because of fraud. The Consumer Financial Protection Bureau is also “monitoring banks’ use of specialty consumer reporting agencies,” according to spokeswoman Moira Vahey.

Many people do not realize that they have a damaged financial history until they are rejected for a bank account. The Fair Credit Reporting Act requires ChexSystems to provide a copy of its report to borrowers, but many people do not know to ask.

Banks say they use the databases to screen for potentially risky customers, and that one negative report probably is not enough to disqualify someone from a bank account. Still, the New York AG’s investigation showed that some people who had overdrawn their account or bounced a single check were routinely excluded from holding an account. Without a checking account, many consumers must use costly alternatives, such as placing a money order or using check-cashing services.









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