CFPB warns of inaccurate checking account reporting

Feb. 3, 2016 -- Stating it is concerned that “inaccuracies” and “lack of account options” is keeping some consumers out of the banking system, the CFPB Wednesday issued a flurry of letters and a warning to credit unions and banks that failure to accurately report negative account histories to credit reporting companies could result in Bureau action.

Additionally, the agency urged the 25 largest banking institutions to “make available and widely market lower-risk deposit accounts that help consumers avoid overdrafting.”

In a release, the CFPB stated that, as more banks have adopted automated overdraft programs, they have placed greater emphasis on screening new applicants for potential risks that may arise if a consumer exceeds his or her account balance.  The CFPB said that one way that banks and credit unions screen account applicants for risk is to use information provided by credit and checking account reporting companies, which, CFPB stated in the release, “have databases of information on involuntary closures of consumer checking accounts supplied by banks and credit unions.”

“Today, the CFPB is warning banks and credit unions of their obligations when reporting.,” the agency added. “And while some banks and credit unions currently offer products that help consumers avoid overdrafts and other risks, the CFPB is also encouraging the industry more broadly to provide account options for consumers so they are less likely to overspend their funds.”

the CFPB noted that, in recent “Supervisory Highlights,” examiners found that one or more financial institutions failed to “establish and implement reasonable written policies and procedures regarding the accuracy of the deposit account information provided to the consumer reporting companies.” CFPB also stated that examiners also found that at least one entity violated its federal obligation to handle consumer disputes about these issues.

“Banks and credit unions should expect accurate information from checking account reporting companies to make fair assessments of deposit account applicants. If the system is tainted with incomplete, inconsistent, and inaccurate information, banks and credit unions cannot make informed decisions,” CFPB stated.


CFPB Compliance Bulletin 2016-01

CFPB letter sent to financial institutions