Banks Easing up Screening for Low Income Applicants

Santander Bank has agreed to put an end to their policy that has very often prevented low income and poor people from opening savings and checking accounts, according to a statement given by New York Attorney General Eric Schneiderman. Santander has now become the third bank, behind Citibank and Capital One, to agree to put the stop to such policies. The long term goal is to provide financial accommodations for millions of Americans who have been labeled as “unbanked.” These are the people who do not have checking or savings accounts, and instead rely on alternative financial services providers for their financial needs.
The unbanked controversy involves a system called ChexSystems. This system is used by most banks to screen applicants prior to opening a new account. ChexSystems is a lot like credit reporting agencies, like Equifax or Transunion, but it focuses on banking history instead of credit cards and other types of loans. The system keeps a database on whether or not applicants have a history of using overdrafts or writing bad checks.
There has been a lot of buzz about ChexSystems, and it has recently come under fire from both the media and the government. The way that its systems have been used has been viewed as being too strict. Applicants who maybe bounced a check a decade ago were still being denied access to open a new checking account. The same thing is true of people who had an overdraft, even if they paid the bank back quickly. When you compare that to the fact that most negative items on a credit report fall off in 7 to ten years – even a bankruptcy – it is easy to understand why so many people consider ChexSystems to be too strict.
The unbanked lifestyle can be difficult for people to deal with. Living a life with no bank account can lead to unnecessary financial burdens and it becomes quite expensive. Unbanked people have to go to check cashing locations to pay for the cashing of their checks, and they often have to pay utility bills in person instead of using online payment processors. Unbanked people even have to pay fees to use pre-paid debit cards on every financial transaction that they make.
About 10 percent of the households in New York are classified as unbanked, according to the Attorney General’s Office. Across the country, the overwhelming majority of unbanked people are poor or minorities. The FDIC estimated that 21.4 percent of all black Americans are unbanked and that 20.1 percent of Hispanics are unbanked, when compared to the national average 8.2 percent.
Schneiderman said, “Denials like these force low-income Americans-and New Yorkers in particular-to resort to high-cost alternatives to banks, simply because of a small financial misstep in the past. We believe this change to the screening process for new account openings will make it easier for consumers who might have been denied services based on their banking history.”
Fidelity National Information Services, the company that owns ChexSystems, said that the banks now have to make proper use of the data provided to them. A statement for the company said, “ChexSystems provides information collected from the financial institutions that are subscribed to its services. ChexSystems does not make any decisions regarding if consumers are granted services.”
The announcement is just a part of an investigation being conducted by the New York Attorney General. Citibank made an announcement that it would change its ChexSystems policies earlier this year, and Capital One has agreed to change its own policies in the summer of 2015.

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