In its latest address, the CFPB has urged banks to improve checking account access by offering lower risk, lower cost checking account options.
The CFPB announced today (Feb. 3) it is taking the necessary steps toward making this action happen following concerns that “consumers are being sidelined by the lack of account options and by inaccurate information used to screen potential customers.” What the CFPB did as part of this action was send a letter to the 25 largest retail banks encouraging the lower-risk checking accounts in order to help consumers avoid overdraft fees.
Along with that, the CFPB also issued a warning toward banks and credit unions regarding their accuracy obligations to report negative account histories to credit reporting companies. Along with this action, the CFPB announced it’s providing consumers with resources to help them better understand checking account services.
“Consumers should not be sidelined out of the basic banking services they need because of the flaws and limitations in a murky system,” said CFPB Director Richard Cordray. “People deserve to have more options for access to lower-risk deposit accounts that can better fit their needs.”
Because a majority of American households have at least one checking account, the CFPB stressed the need for banks to offer options that enable consumers to stay connected to basic banking services. But because of the popularity of automated overdraft programs, the CFPB has urged greater screening for applicants.
As a result, banks and credit unions used checking account reporting companies to screen applicants. Those companies use databases of information from consumers’ checking accounts, as provided by banks and credit unions, but the CFPB has expressed concern about the accuracy of such reports. The CFPB also warned banks and credit unions they must have built-in systems to ensure accuracy about their offerings when providing consumers with the information needed to open accounts.
“The CFPB is warning banks and credit unions of their obligations when reporting. And while some banks and credit unions currently offer products that help consumers avoid overdrafts and other risks, the CFPB is also encouraging the industry more broadly to provide account options for consumers so they are less likely to overspend their funds,” The Bureau wrote in a news release.
As a result, the CFPB has urged retail banks to do more to help create, as well as promote, the options that best fit consumers’ financial needs. That includes options that do not authorize consumers to spend money that they don’t have.
The recommendations include:
- Encouraging banks and credit unions to offer products that are designed not to authorize overdrafts and that do not charge overdraft fees. A number of institutions have introduced “no-overdraft” accounts and offer them alongside more common checking account products. However, in a recent CFPB review of the top retail banking websites, the CFPB found nearly half do not appear to offer any deposit account that ensures consumers can’t overspend. Such a product would give consumers an opportunity to choose an account that helps them avoid overdrafting.
- Advertise lower-risk products. The CFPB is concerned that even when companies have these accounts available, consumers don’t know about them. So the CFPB is also urging banks and credit unions to feature such products prominently in their marketing efforts, their online and in-store checking account menus, and during sales consultations.