TIME

Time.com

MY ACCOUNT SIGN IN SIGN OUT SUBSCRIBE SUBSCRIBE
Home U.S. Politics World Business Tech Health TIME Health Entertainment Science Newsfeed Living Sports History The TIME Vault Magazine Ideas TIME Labs
Photography Videos The Goods Press Room TIME Guide to Happiness
The 100 Most Influential People Guns in America Next Generation Leaders Person of the Year Space Explorers: The ISS Experience
Subscribe Newsletters Feedback Privacy Policy Your California Privacy Rights Terms of Use Ad Choices Ad Choices
RSS TIME Apps TIME for Kids Advertising Reprints and Permissions Site Map Help Customer Service © 2022 TIME USA, LLC. All rights reserved.
Subscribe
Sign InSubscribe

Banking

Why Banks Might Refuse to Take Your Money

By Martha C. White Aug. 02, 2013
  • Share
  • Read Later
    • Send to Kindle
Justin Sullivan / Getty Images

Related

  • Prepaid Debit Cards: A Few Good Ones to Consider — And Several to Avoid
  • Why Banks Love Debit Cards Again
  • Three Alternatives to Paying Big Bank Fees
  • Over a Million Are Denied Bank Accounts for Past Errors New York Times
  • Email
  • Print
  • Share
    • Facebook
    • Twitter
    • Tumblr
    • LinkedIn
    • StumbleUpon
    • Reddit
    • Digg
    • Mixx
    • Delicious
    • Google+

Follow @TIMEBusiness

People are being denied bank accounts based on what’s in reports that most of us never even knew existed. 

Most people are familiar with the idea of a credit score — usually a FICO score or a VantageScore — that determines whether or not a lender will let you borrow money, and at what rate. But there’s a lesser-known credit reporting system that dictates what you’re allowed to do with your own money. And in some cases, these little-known systems end up giving banks reason to turn down consumers who are trying to open up accounts.

In a new investigation, the New York Times chronicles the financial rabbit hole a growing number of Americans have fallen into: They’re locked out of mainstream banking for relatively minor slip-ups like overdrawing an account, or because of mistakes in a file they didn’t even know existed.

“Hundreds of thousands of Americans are being shut out for relatively small mistakes,” commissioner of New York City‘s Department of Consumer Affairs Jonathan Mintz tells the paper. One woman was turned down when trying to open an account with a credit union because of a $40 overdraft she incurred three years ago, even though she paid the amount back, plus interest and fees.

One of the biggest players involved in this world is ChexSystems, which is owned by financial services giant Fidelity National Information Services; another service many banks rely on is Early Warning Services. One of the purposes of these businesses is to keep tabs on fraudsters and check-bouncers who try to game the system, but consumer advocates say efforts to stamp out fraud have gone into overdrive and unfairly penalize ordinary people — often low-income earners who are more likely to bounce a check or overdraw an account.

(MORE: Big Banks Are Finally Making It Easier to Compare Checking Account Fees)

Obtaining one’s credit information and ensuring its accuracy can be a headache. Many people don’t know where or how to get their files, so last November, the Consumer Financial Protection Bureau published a resource where people can go to obtain reports from operations like ChexSystems, categorized as “specialty consumer reporting companies” by the CFPB.

If there are errors in your report, attempting to have them corrected can be an exercise in frustration. In 2011, ChexSystems settled without admitting wrongdoing a class-action lawsuit over how it handled disputed items in people’s files.

The blog Deposit Accounts published the saga of one bank customer snared in a ChexSystems product called FraudFinder. After he was denied an account, he looked up his report and found that his address was listed as being in a commercial zone — even though it had been converted into an apartment complex several years earlier. It took two letters to get this error corrected.

Another item the reader says got him flagged as suspicious was that he was issued a Social Security number at the age of 30. That was when he immigrated to the United States, he said, so the information was technically true — but he argued it shouldn’t have put him on some special “watch” list.

The other big drawback to these reports, points out Ginger Chouinard in a report for the University of New Mexico School of Law, is that they’re one-sided. “Unlike credit reports, little positive account information is included in an account screening report… With respect to account usage, the report essentially contains only negative information.”

One estimate has it that 2.3 million Americans who applied for bank accounts online in 2011 were rejected, and an FDIC-commissioned report says 25% of banks will jettison an applicant for a single negative item in their file.

(MORE: Not Knowing About This Credit Report Can Burn You)

These denials often blindside consumers. “They had no idea information was being collected on their checking account usage, much less that it could be used to deny them an account in the future,” the blog Credit Slips states concerning consumers shut out by banks due to reports from ChexSystems and the like.

“Most of my clients have no idea these databases exist, let alone what they did to end up in them,” Neighborhood Trust Financial Partners financial counselor Kristen Euretig tells the Times.

  • Most Popular
From Business & Money
  1. Business
  2. 7-Eleven’s Free Slurpee Day: This Year With Bigger Slurpees!
  3. Why JCPenney’s ‘No More Coupons’ Experiment Is Failing
  4. Citigroup’s Chuck Prince wants to keep dancing, and can you really blame him?
  5. Germany Has Become the Cut-Rate Prostitution Capital of the World
From Time.com

Connect With TIME

  • Home
  • U.S.
  • Politics
  • World
  • Business
  • Tech
  • Health
  • Science
  • Entertainment
  • Newsfeed
  • Living
  • Ideas
  • Parents
  • Sports
  • History
  • The TIME Vault
  • Magazine
  • Subscribe
  • Give a Gift
  • The Goods
  • Press Room
  • Newsletters
  • Customer Service
  • Site Map
  • Privacy Policy
  • Your California Privacy Rights
  • Terms of Use
  • Advertising
  • Ad Choices Ad Choices
  • Careers
© 2022 TIME USA, LLC. All rights reserved.