Capital One to Stop Using Program to Weed Out Customers With History of Account Overdrafts

June 16, 2014
Washington Post 
overdraft news
Capital One Financial will no longer use the popular screening program ChexSystems as a filter for potential customers with a history of overdrawing their accounts, the bank has announced. It is the first of six banks under investigation by New York Attorney General Eric Schneiderman to agree to use the system only to screen customers for past fraud. The policy change takes effect by the end of this year and extends to all of the bank’s U.S. branches.

Banks and credit unions often flag potential account holders for behaviors, such as bounced checks and repeat overdrafts, that could indicate fraud. Some, though, also use databases like ChexSystems to exclude people who simply struggle to manage their money, leaving thousands on the fringes of the mainstream banking system. Without an account, consumer advocates say, unbanked Americans are forced to turn to more costly alternatives for cashing checks and paying bills. The Consumer Financial Protection Bureau also is looking at banks’ use of specialty reporting agencies to screen consumers.

While the Fair Credit Reporting Act gives consumers the right to request a copy of their ChexSystems file and dispute any erroneous information, few even realize that the database exists. Consumer lawyers say complaints about ChexSystems dramatically rose around 2000, when banks implemented more aggressive policies to maximize fee income from customers who overdraw their accounts.

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