While the American public is familiar with the Teletrac or Telecheck consumer credit companies which issue reports used to determine one’s creditworthiness, no one is aware that banks have been netting rock solid candidates for bank accounts through the use of the private-run databases, and vetting those seen as less than reliable. It is estimated that close to a million people from the lower economic bracket have been subject to scrutiny which resulted in the denial of their application for a new bank account.
A Checking account is a basic tool for money management, but many are effectively barred from getting one, after mistakes like overdraft or bouncing checks. Banks make heavy use of the databases like ChexSystems to prevent scam and bank account fraud, which amounted to almost 10 billion dollars last year.
In light of reports on losses incurred by banking institutions, the reasoning for the scheme may be justified, but whether all the cases should be treated equally remains to be seen. Banks and data bases representatives claim that while reports help them sieve out only unreliable customers, they add reassuringly that a majority of applications would not be turned down due to a tiny slight as culled from a report.
The use of the databases has met with severe criticism from customer protection groups, which reported the issue to the Customer Financial Protection Bureau. The complaints dispute the validity of the reports, problems with removing erroneous entries, or receiving a copy of the reports for a fee. Reports from other sources may not provide a detailed explanation of the customer account’s mismanagement, though banks have to delineate their reasons for rejecting an application.
On a different note, admittedly, the new policies on banking fees have prompted banks to seek their steady revenue elsewhere ie. with wealthier customers, in effect, seriously limiting their offer for the less affluent citizens, despite the bank officials’ claims of catering to everyone’s needs.
While a mistake of missing the deadline for paying the overdraft balance should be relatively easy to prevent or swiftly rectified, many customers are in for an unpleasant surprise to learn they cannot be accepted for a checking account. Despite a steady job and regularly made payments they are facing higher costs of managing their money and bills through other money services. Even worse, the proof of their tarnished reputation is kept in the database for as many as seven years for greatest offenders.
Written By: Katarzyna Madela
Source: http://dealbook.nytimes.com/2013/07/30/over-a-million-are-denied-bank-accounts-for-past-errors/?_r=0
Source:
http://guardianlv.com/2013/08/bouncing-checks-consumers-tarnished-reputation-kept-in-database/