Bank Databases Intended to Detect Fraudsters Now Used to Keep Bank Accounts from Low-Income Americans

Friday, August 02, 2013

Low-income Americans are increasingly being denied checking accounts by banks using information originally intended to identify perpetrators of fraud.


About 10 million U.S. households currently lack a banking account—a figure that has risen 10% in the last four years—and poor people in particular are being squeezed out by financial institutions.


What’s happened is that banks are using bounced checks and overdrafts to blacklist more than a million low-income individuals. The rejections can last as long as seven years, when the black marks disappear from databases used exclusively by banks.


These private databases were first established 20 years ago to help banks combat fraud. Now, however, institutions like Bank of America, Citibank and Wells Fargo use them to avoid providing accounts to risky customers.


The largest bank database is kept by ChexSystems, a subsidiary of the Jackson, Florida-based financial institution FIS. Wells Fargo, JPMorgan Chase and other major banks are key subscribers, which “regularly contribute information on mishandled checking and savings accounts,” according to ChexSystems’ website.


A competing database, Early Warning, is owned by five large banks and has, as its subscribers, 80% of the country’s 50 largest banks.


Jonathan Mintz, commissioner of the New York City Department of Consumer Affairs, says the problem has impacted 825,000 New Yorkers trying to get access to the mainstream financial system.


“Hundreds of thousands of Americans are being shut out for relatively small mistakes,” Mintz told The New York Times.

-Noel Brinkerhoff


To Learn More:

Over a Million Are Denied Bank Accounts for Past Errors (by Jessica Silver-Greenberg, New York Times)

U.S. Banks Profit from Facilitating Fraud against Their Customers (by Noel Brinkerhoff, AllGov)

Major Banks Use Pay-Card Scheme to Shift Millions of Dollars in Costs to the Unemployed (by Noel Brinkerhoff, AllGov)         

Banks Squeezing Money from Unemployed (by Noel Brinkerhoff, AllGov) 


Leave a comment