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Post date: January 28 2015

A.G. Schneiderman Announces Commitment By Citibank To Eliminate Barriers That Unfairly Keep Low-Income Americans From Opening Checking And Savings Accounts

Policy Changes Will Expand Access To Bank Accounts For Previously Excluded Consumers

Schneiderman: New Yorkers Must Have Equal Access To Banking Services

NEW YORK – Attorney General Eric T. Schneiderman today announced that Citibank, N.A. has agreed to adopt new policies governing its use of ChexSystems, a consumer reporting agency that screens people seeking to open checking or savings accounts. Citibank’s new policies are expected to allow thousands of additional New Yorkers and consumers nationwide to open bank accounts by March 15, 2015. The change comes amid concerns that screenings by ChexSystems and other consumer reporting agencies, which are used by most of the nation’s banks, adversely affect lower-income applicants and force them to turn to high-cost alternative financial services like check-cashing outlets. With today’s agreement, Citibank now joins Capital One as the second bank to commit to overhaul its use of ChexSystems.

“No one should be denied access to a bank account because of a bounced check from years ago or because they were a victim of identity theft,” Attorney General Schneiderman said. “Denials like these force low-income Americans – and New Yorkers in particular – to resort to high-cost alternatives to banks, simply because of a small financial error in the past. I commend Citibank, following Capital One, for stepping up and working with us to help eliminate an unnecessary barrier to opening a checking or savings account. I look forward to working with additional banks willing to do the same.”

ChexSystems is one of several databases used by some of the nation’s largest banks and credit unions to analyze the banking history of consumers who apply for bank accounts. Customers who are deemed by ChexSystems to present a credit or fraud risk are typically denied the opportunity to open an account. Such databases disproportionately affect lower-income Americans, often punishing them for relatively small financial errors. As a result, many consumers must resort to alternative banking services to carry out basic financial transactions like cashing payroll checks and paying bills—services that cost them hundreds, if not thousands of dollars each year in extra fees. Without access to mainstream financial services, consumers also are denied opportunities to build assets and create wealth and are more vulnerable to theft and predatory lending practices.

Studies show that more than 3 million New York households are either “unbanked,” meaning that no family member has a bank account, or are “underbanked,” meaning that they have a bank account but also rely on high-cost alternative financial services.

According to one study, the New York State average for unbanked households is 9.8%, higher than the national average of 7.7%. Of counties with more than 100,000 households, the study ranks the Bronx as the second most unbanked county in the country and Brooklyn as the eighth most unbanked county. Of cities with more than 100,000 households, Buffalo ranks as the eighth most unbanked city in the country. Of midsize cities -- those with 50,000 to 100,000 households -- Rochester is the eighth most unbanked. In New York City, according to a 2010 study, more than 825,000 adults did not have bank accounts and, in two neighborhoods —Jamaica in Queens and Melrose in the Bronx—residents spent more than $19 million per year on check-cashing fees.

Marc Morial, President and Chief Executive Officer of the National Urban League, said, “Promotion of economic opportunity for minority and low-income families and communities must remain a top priority.  Too many African-American and Latino communities are denied access to traditional banking products and left vulnerable to costly and predatory check cashing outlets. I thank the Attorney General’s Office for working to ensure that banks are extending basic services equally to all communities.”

The Attorney General’s agreement with Citibank comes as part of an ongoing investigation by the Attorney General’s Civil Rights and Consumer Frauds Bureaus into the use of consumer-reporting agencies like ChexSystems by major American banks. In June 2014, the Attorney General announced an agreement with Capital One in which the bank committed to making changes to its use of ChexSystems, a move that, like today’s agreement, expanded banking access for thousands of consumers nationwide.

Although Citibank will continue screening customers for past fraud, it will revamp its so-called "account-abuse" screening so that applicants are not rejected for isolated or minor banking errors, such as paid debts or a small overcharge. The changes to Citibank’s policies are expected to take effect in mid-March 2015 and will be implemented nationwide.

This matter is being handled by Assistant Attorney General Melvin Goldberg of the Consumer Frauds Bureau and Special Counsel Jessica Attie of the Civil Rights Bureau. The Civil Rights Bureau, led by Chief Kristen Clarke, is part of the Division of Social Justice, which is led by Executive Deputy Attorney General for Social Justice Alvin Bragg. The Consumer Frauds Bureau, led by Chief Jane M. Azia, is part of the Division of Economic Justice headed by Executive Deputy Attorney General Karla G. Sanchez.

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