CFPB Takes Aim at Lack of Checking Account Options for Consumers
The CFPB announced today a three-prong approach to ensure consumers are receiving a fair shake regarding checking account access. The initiative is born out of the bureau’s concerns that consumers lack access to checking accounts because of incorrect information banks and credit unions use to vet potential customers. The CFPB announced that it’s warning FIs and credit unions to make sure they’re reporting accurate consumer account histories or face possible CFPB action. The bureau also sent a letter to the 25 largest banks urging them to offer and promote lower-risk accounts that prevent consumers from spending more than they have. The agency also is providing resources to consumers to assist them in finding quality checking and prepaid accounts that prevent overdrafts.
Consumer resources include information on actions the can take if they are denied a checking account, including obtaining a copy of their checking account history, disputing inaccurate information from a bank or credit union, and shopping around for lower-risk products for consumers with poor account histories. The CFPB also suggests prepaid products as options that would protect consumers from overdrafts, which could indicate that the bureau’s final rule on prepaid accounts, due out this spring, may restrict the prepaid cards from offering overdraft.
“At the [CFPB], we believe that people who want the benefits and convenience of some kind of deposit account deserve a fair opportunity to have one,” said CFPB Director Richard Cordray. “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 prepared remarks for a field hearing on checking account access in Louisville, Ky., today, Cordray mentioned prepaid as a “gateway” to the banking system. “Those who would like to have a traditional checking account but are unable to get one should be given a fair opportunity to manage their day-to-day finances effectively and affordably by other means, such as a lower-risk checking account or prepaid card,” he said. “And so we envision a system that recognizes and responds to consumer needs by providing checking accounts and prepaid accounts that better fit their personal financial circumstances.”
The CFPB’s push toward low-balance checking accounts is reminiscent of similar and largely unsuccessful efforts from the FDIC. Although checking account access is the focus of today’s announcement and field hearing, the CFPB mentions prepaid accounts alongside checking accounts in its “Consumer Guide to Selecting a Lower-Risk Account.” Prepaid accounts also are prominently featured in Cordray’s letter to FIs urging them to offer and promote lower-risk accounts, although Cordray notes in his prepared remarks that “[p]repaid cards may not be the first choice for every consumer, but everyone deserves the opportunity to choose what is best for him or her.”
According to Brad Fauss, president & CEO of the Network Branded Prepaid Card Association, prepaid may finally be gaining ground with the CFPB as an important, mainstream financial services tool. “Hopefully, once the final rule on prepaid accounts comes out, the CFPB will view prepaid on more equal footing with checking accounts as consumers already view the products today,” Fauss says. “In fact, prepaid accounts often are viewed as a preferred option, rather than a gateway product, by millennials as described in the Philadelphia Fed’s December 2015 report titled ‘Millennials with Money Revisited.’”