Today, right now, the CFPB is holding a field hearing in Louisville on problems consumers face when opening bank accounts. (If you miss the live video, it will be webcast-archived in a few days). A new CFPB report finds that access to bank accounts is stymied by two problems:
First, big banks frequently offer consumers more expensive accounts with high-cost "overdraft protection" as a "feature" (not a bug) instead of suggesting more affordable accounts.
Further, the CFPB finds that mistakes by banks in reporting to specialty "bad check" credit bureaus, coupled with bad dispute reinvestigation practices by the blacklist credit bureaus, make it harder to open accounts. You are only in their "blacklist" databases if they have negative information about you. On the other hand, an Equifax, Experian or TransUnion credit report used for credit and other purposes is more like your high school report cards, containing both positive and negative information.
The CFPB issued warnings to both the banks and the bad check credit bureaus (the largest are Chexsytems and Early Warning).
It also provided consumers with significant new fact sheets and advice. This CFPB blog entry summarizes new tips on choosing low-risk bank accounts and dealing with the bad check credit bureaus.
As CFPB Director Rich Cordray said today in Louisville:
"Today, for a wide variety of reasons, there are nearly 10 million unbanked households that have no checking or savings account. Some consumers may have been rejected when they tried to open an account before, or they might have lost an account after it became overdrawn and they were unable to recover. Others might simply choose not to participate in the banking system, perhaps because they are uncomfortable with the costs or risks they believe it poses for them.
At the Consumer Bureau, we believe that people who want the benefits and convenience of some kind of deposit account deserve a fair opportunity to have one. We are concerned that some people are being inappropriately sidelined by two things. The first is the lack of account options that fit their financial needs and situations. The second is inaccurate information used to screen some potential customers."
In 2010, the pre-CFPB regulators issued a rule that prohibited banks from signing you up for "standard overdraft protection" -- which allows you to overdraft, for a fee of up to $35 per occurrence, at point-of-sale debit card transactions at coffee shops and stores -- unless you affirmatively opt-in to the product. (The rules do allow you to bounce paper checks.) However, the CFPB has been concerned with aggressive marketing of the opt-in product (many consumers may have inadvertently opted in; you should make sure you are not paying up to $35 an occurrence to "cover" small debit card overdrafts--if you opt-out your card will simply be declined in the future). It, and the FDIC -- which regulates certain smaller state banks -- have also been concerned with certain overdraft practices. Some banks, for example, encourage consumers to pay up to 6 or more bounced check fees (averaging over $30) each day. Some banks "re-order" your transactions from "biggest-to-smallest" at the end of the day to increase fee revenue (you make several small retail transactions in the morning that do not overdraw your account, but then a larger check comes in at the end of the day which the bank moves to the front of the queue so that all of the checks and/or debit transactions -- not only the last one -- result in a fee.)
The idea of the CFPB needs no defense, only more defenders.