As anticipated, in conjunction with its field hearing today, the CFPB announced several steps it has taken to improve consumer access to checking accounts. These steps consist of a sending a letter to the 25 largest retail banks encouraging them to offer and market “lower-risk” deposit accounts “to help consumers avoid overdrafts,” issuing a bulletin “warning banks and credit unions that failure to meet accuracy obligations when they report negative account histories to credit reporting companies could result in Bureau action,” and releasing new resources to assist consumers in opening and managing check accounts.
Letter to financial institutions. In its press release, the CFPB states that in a recent 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.” Director Cordray’s letter (which he describes as “simply a suggestion”) urges “more banks and credit unions to make it a point to provide consumers with a viable choice of a lower-risk account that promises no authorized overdrafts.” The letter suggests that such an account could take the form of a prepaid card or a checking account. According to Director Cordray, because financial institutions would not have to apply “the same risk thresholds that are used to determine eligibility for a standard checking account” when considering an applicant for a low-risk account, they would be able to provide accounts to applicants who would otherwise be “screened out of the banking system.” The letter also comments that a lack of marketing by institutions currently offering low-risk accounts has “lessened their visibility and undermined their rate of uptake among consumers who might otherwise benefit from their availability.” Such institutions are urged to “feature them among their standard account offerings both in their branches and online.”
Director Cordray’s “suggestion” that financial institutions offer accounts “specifically designed to prevent overdrafts and overdraft fees” appears to be a precursor to the CFPB’s direct regulation of overdrafts. The CFPB has extended the timetable for overdraft rulemaking several times and further delay seems likely given that the CFPB’s fall rulemaking agenda estimated that further prerule activities would occur in January 2016 and none have occurred so far this year.
In addition, Director Cordray’s prepared remarks for the field hearing suggest the CFPB may take steps to address funds availability policies. In July 2015, the CFPB released a list of nine “Consumer Protection Principles” that were intended to express the CFPB’s “vision of consumer protection in new faster payments systems.” Those principles included faster funds availability and transparency in information about transaction status and disclosures about costs, risks, funds availability and security of payments. In his remarks, Director Cordray acknowledged “the decision some banks and credit unions have made to provide consumers with real-time information about the funds in their accounts available to be spent…through various means, including online banking and text and e-mail alerts, which can reduce the risks that consumers inadvertently overspend their accounts.” However, he commented that “[s]till, we encourage the banks and credit unions to press harder as they think about how they can tailor their products more effectively for a larger base of potential customers, which includes making funds available as early as they can.”
Compliance Bulletin. In a new compliance bulletin (2016-01), the CFPB discusses the obligation of furnishers under Regulation V (which implements the Fair Credit Reporting Act) “to establish and implement reasonable written policies and written procedures regarding the accuracy and integrity of information relating to consumers that they furnish to consumer reporting agencies (CRAs).” The bulletin emphasizes that this obligation “applies to furnishing to all CRAs, including furnishing to specialty CRAs, such as the furnishing of deposit account information to CRAs.” CRAs that specialize in checking account screening commonly provide reports about a consumer’s check writing and account history, including whether a consumer had a previous account closed involuntarily or has a record of bounced or returned checks and overdrafts, and such reports are frequently used by banks and credit unions to determine whether to open a checking account for a new customer.
To illustrate the need for an institution’s policies and procedures to address furnishing to all CRAs, the bulletin discusses the obligations of an institution that “furnishes credit information to nationwide CRAs and deposit account information to nationwide specialty CRAs.” The CFPB states that such an institution “must consider the appropriate approach to each type of furnishing in its policies and procedures in order to comply with Regulation V.” It notes that “the type, frequency, and nature of the information furnished to CRAs can vary significantly” and “there also may be significant differences in the reporting formats and codes used to furnish to these agencies.”
Consumer resources. The CFPB released the following new consumer resources:
- “Consumer Guide to Selecting a lower-risk account” which discusses steps a consumer can take to identify and select an appropriate checking or prepaid account, such as “low-risk” accounts.
- “Consumer Guide to Managing your checking account” which provides “tips for reducing the fees” on checking or prepaid accounts.
- “Consumer Guide to Checking account denials,” which the CFPB labels a “consumer advisory,” discusses the use of specialty reports by banks and credit unions and suggests steps a consumer can take if he or she is denied an account, such as obtaining a copy of the consumer report that was used for the denial. The CFPB provides sample letters consumers can use to dispute inaccurate information with the CRA that created the report and a financial institution that provided such information.