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Changes in procedures will help consumers gain access to bank services

The way banks treat some young and low-income customers may get a little better following a warning from New York Attorney General Eric T. Schneiderman.

He recently announced that Capital One Financial Corp. has agreed to adopt new policies governing its use of ChexSystems, a credit bureau that screens people seeking to open checking or savings accounts.

This is important to thousands of New Yorkers denied bank accounts because of what amounted in many cases to as minor a slip as an overdraft.

As the New York Times reported, small mistakes such as these can have huge consequences for consumers who have found themselves unable to open banking accounts for as long as five years after the mistake. When that happens they are forced to use expensive services such as check cashing agencies.

Most people probably have no idea that there are vast private databases, including ChexSystems, that are used by major banking institutions. These databases were intended to weed out serial fraudsters, but they may red-flag people for minor problems, contributing to the roughly 10 million households in the United States that lack a basic bank account.

Studies show millions in New York State are either unbanked, meaning that no family member has a bank account, or are underbanked, meaning that they have a bank account but also rely on high-cost alternative financial services.

One study shows the state average for unbanked households at 9.8 percent, higher than the national average of 7.7 percent. Of cities with more than 100,000 households, Buffalo ranks as the eighth most unbanked city in the country.

The deal with Capital One is reported to have stemmed from a broader investigation by the attorney general into how the nation’s largest banks use the databases.

In a press release, Schneiderman commended Capital One for “stepping up and working with us to eliminate an unnecessary barrier to opening a checking or savings account.”

He hopes other banks will do the same. So do we. Those consumers finding themselves on the wrong side of the ledger are often low-income and already disproportionately disadvantaged.

The databases were set up with the worthy goal of weeding out fraud. But stronger systems must be put in place to distinguish those who have made honest errors from the chronic abusers.