In recent years, low income consumers are at great risk forbeing denied bank accounts, a necessityfor building finances and aiding low income Americans at getting ontheir feet. Innocent mistakes like a bounced check or anover-draft from an account have tarnished these consumers fromobtaining bank accounts because of private databases used by mostof America’s banking industry.
In a post written last week, I explained how credit reporting agencies are not the only source that track and report on your financial history. Private databases used by our banks are hindering the efforts of low income consumers to make their way out of a financial rut and are the contributing factor to approximately 10 million households in our country that cannot get a bank account.
While credit reporting agencies report on your credit history for a period of 7 to 10 years, private databases only show your financial “lapses” in the banking industry. Using these databases to determine a consumer’s credit worthiness disproportionately affects low income consumers who more often live pay-check to pay-check making it likely to bounce checks and have overdrafts. These databases were created over 20 years ago and in the recent past have hindered the efforts at aiding low income Americans to build their financial security by opening checking accounts.
Low income consumers with decent credit reports are ineligible for opening checking accounts because of minor mistakes reported to these databases forcing them to turn to expensive check cashing facilities. Without a checking account, low income consumers are more likely to make late payments and unable to save for their future, essentially forcing them to remain low income even with a decent job and a regular pay check.
The Consumer Financial Protection Bureau is aware of this problem facing low income Americans and is currently in discussions about whether these databases should be forced to comply with the Fair Credit Reporting Act. Currently, most consumers are not aware of the existence of these databases and have no idea what is reported about them.