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CFPB Eyeing Checking Accounts

The Consumer Financial Protection Bureau (CFPB) is looking hard at banks’ policies on opening consumer checking accounts, including the third-party databases they use, American Banker reported.

In an Oct. 8 forum on access to checking accounts, CFPB director Richard Cordray opened the session by raising issues about overdraft protections, how banks report and use credit scores and how they gauge a consumer’s credit risk. That seemed to signal that the CFPB could sweep checking and overdraft fees into its forthcoming rules on payday lenders.

“The CFPB looking into the process of how bankers screen accounts is pretty much an unprecedented step,” said Rich Walker, a former marketing executive at Capital One. While the CFPB has repeatedly warned lenders and credit reporting agencies against sharing inaccurate information about consumers, “when you start to get into the process bankers use to open accounts, it’s just a very different focus,” Walker said.

Part of that focus is the specialty consumer reporting agencies that typically have databases on how many times consumers overdrew their accounts or wrote bad checks, and are used by more than 80 percent of banks to screen customers for new accounts. During the CFPB forum, Cordray said these credit agencies provide banks with information that’s “primarily derogatory about a consumer” and can be both inaccurate and inconsistent because there are no set standards for how banks report this data.

Cordray also cited the development of “improved, low-cost transaction accounts, which do not include any overdraft or other credit feature, and which are accessed either through traditional branch networks, or through alternative channels,” adding that the CFPB wanted to ensure that alternative approaches offered the protections required for bank and credit union checking accounts.

While there was officially no connection, the day after the forum the CFPB cited M&T Bancorp for deceptively marketing a free checking account program. M&T paid $3.1 million to settle claims that it damaged the credit ratings of customers whose supposedly free accounts were closed.

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