Check-screening forum signals CFPB's interest in the topic

October 8, 2014

WASHINGTON (10/9/14)--Most of the 200 million Americans who have checking accounts were required to provide information to their financial institution, and the Consumer Financial Protection Bureau (CPFB) is interested in that information. The bureau hosted a forum on checking account access Wednesday to explore screening methods used by financial institutions.

CFPB Director Richard Cordray said the bureau is looking to balance the needs of financial institutions and with the needs of consumers for access and protection.

"Consumers need access to accounts that allow them to move their money around securely and efficiently, giving them control over their financial well-being without exposing them to unwanted or unforeseen risks," he said. "The information used to determine their eligibility for an account needs to be accurate so that the account screening process does not unfairly restrict their access to the banking system."

Financial institutions generally screen consumers who want to open checking accounts for various forms of risk. This often includes credit risk, a way of determining if consumers are likely to incur overdraft fees and be able to pay them.

Jane Watkins, president/CEO of $2.5 billion-asset Virginia CU, Richmond, and chair of CUNA's

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Jane Watkins (far right), chair of CUNA's Payments Policy Subcommittee, participated in roundtable discussions at the CFPB forum on check screening Wednesday. She noted that account screening for such things as fraud can be an appropriate tool that helps protect a credit union's other members. Watkins is shown here with other forum participants: Zixta Martinez , CFPB associate director for external affairs, CUNA Deputy General Counsel Mary Dunn, Helen Godfrey Smith, president/CEO of Shreveport (La.) FCU. (CUNA Photo)

Payments Policy Subcommittee, participated in roundtable discussions. Among the points she raised, she noted that account screening for issues such as fraud can be an appropriate tool that helps to protect a credit union's other members, who own the credit union and ultimately bear the costs it must incur in handling fraud.   

Helen Godfrey Smith, president/CEO of Shreveport FCU of Shreveport, La., $102 million in assets, moderated the forum's first panel discussion, and commended CUNA for attending.

Smith, during the panel, said relying solely on credit reports can deny access to consumers.

"There are consumers who could possibly be losing access to mainstream financial services because our view is a little too narrow," she said. "Our goal has to be to allow our screening systems to not deny access to a segment of consumers who really, really need access to checking accounts."

Executive Director of the National Credit Union Foundation Gigi Hyland, CUNA Deputy General counsel Mary Dunn, Senior Associate General Counsel Jared Ihrig and Senior Assistant General Counsel Luke Martone also participated.

The areas the CFPB is specifically concerned with are:

  • Accuracy of the information in reports, particularly when the reports consist of mostly negative information. Cordray said the bureau is concerned about whether this information contains too many imperfections and inconsistencies;

  • Whether consumers are able to readily to access their reports, and whether they are able to get inaccuracies fixed. Cordray said it is essential that consumers have an effective avenue of appeal available for them to challenge inaccuracies; and

  • How these reports are being used. Since checking accounts are not inherently credit vehicles, instead used to deposit and transfer funds, Cordray said it is "troubling" that financial institutions can use a credit report to exclude consumers from an account.

Use the resource link below to access the forum's page, where a recording of the event will be posted.

CFPB forum on access to checking accounts