In remarks delivered yesterday at a field hearing in Louisville, Kentucky, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced three actions the CFPB is taking to encourage financial institutions to expand access to checking accounts to the 10 million households it claims lack access to basic checking or savings accounts. These steps focus on encouraging institutions to improve credit reporting accuracy and expanding the offering of "low risk" deposit account options, particularly accounts that do not permit checking overdrafts or charge overdraft fees.
First, Director Cordray sent a letter to the CEOs of the nation's 25 largest financial institutions, encouraging them to broaden their array of transaction account options to "unbanked" populations, with a special focus on offering account options that are "specifically designed to prevent overdrafts and overdraft fees." The letter contends that these account options reduce risk of costly overdraft fees to consumers and help consumers manage their spending and maintain an account in "good standing." Simultaneously, the CFPB argues, such accounts will reduce risk to financial institutions and therefore allow them to relax screening criteria and expand access to banking.
Second, the CFPB issued Compliance Bulletin 2016-01 to respond to what it contended was a failure by "some financial institutions" to comply with their obligations under Reg. V to implement reasonable policies and procedures to ensure the accuracy and integrity of consumer information reported to credit reporting agencies (CRAs). Director Cordray has argued that inaccurate reporting to CRAs serves as a barrier to access to banking. The Compliance Bulletin warns that if a furnisher is found to be in violation of Reg. V or other federal consumer financial laws and regulations, it will take "appropriate supervisory or enforcement actions to address violations and seek all appropriate remedial measures, including redress to consumers."
Finally, the CFPB issued a consumer advisory to educate consumers about "the checking account options available to consumers and to point out the rights they have if they are denied access to a checking account or if misinformation is reported about them." The advisory contains information to assist consumers with identifying "lower risk accounts," including those accounts with no overdraft options, and provides sample letters consumers can use to dispute inaccurate credit reporting information both to banks and credit unions and to CRAs.
These actions are consistent with the CFPB's proactive, data-driven approach to regulating and monitoring the financial services industry. Director Cordray's letter is also an extension of the CFPB's efforts to curb institutions' use of overdraft fees in consumer deposit accounts, even though the letter does not claim that offering no-overdraft or overdraft-free accounts is required by law, rule, or regulation. Banks should take this opportunity to undertake a compliance review of their consumer account offerings and consumer reporting policies and procedures.
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