If you want to open a consumer checking or savings account at a bank, credit union or other financial institution, the institution will usually review your consumer report obtained from a third-party vendor. These reports include information from other financial institutions regarding your deposit account activities, including the reasons your prior accounts were closed, your overdraft check history and information regarding fraudulent activities impacting your accounts, such as identity theft. An institution will then evaluate the positive and negative information in this report to determine whether to open the account and/or the type of account available to you. There are a number of companies that collect this information and provide this service to financial institutions, such as ChexSystems Inc. and Early Warning Services, LLC. These vendors are considered specialty consumer reporting agencies, are subject to the federal Fair Credit Reporting Act (FCRA), and have been providing these account screening services to financial institutions for years.
Normal business practices
These comments are interesting — since most states consider the bouncing of checks, in certain situations, to be a criminal activity. Financial institutions may also be required to file a Suspicious Activity Report with the Financial Crimes Enforcement Network regarding certain bounced check activities of its customers. Also, absent from the Attorney General’s announcement was any statistical analysis documenting that lower income consumers bounce checks more often than other groups. The middle class, wealthy, and 1 percent among us bounce checks too.
The press release was short on data and drama. It is interesting to see a regulator or enforcement authority raise a disparate impact claim without any supporting statistical data. The press release noted only some general data regarding the number of unbanked or underbanked residents in New York, but this data was not tied in any way to Capital One’s account screening practices. There may be statistical data documenting that lower income individuals had been disproportionately harmed by Capital One’s practices, but the Attorney General did not trumpet any such documented disparities in his press release. Also, absent from the press release were the “victim stories” we often see in these announcements.