A.G. Schneiderman Issues Letter Calling On Banks To Revise Their Applicant-Screening Methods And To Expand Access To Mainstream Banking For Unbanked And Underbanked Communities

Attorney General’s Agreements With Five Banks Have Allowed Tens Of Thousands Of Consumers In New York To Open Checking Accounts

Amalgamated Bank Is Latest Bank To Overhaul Its Applicant-Screening Procedures

NEW YORK – Attorney General Eric T. Schneiderman today called on banks operating in New York State to revise their consumer-screening protocols to ensure that more consumers receive access to standard checking accounts. In a letter issued to nearly 100 banks, the Attorney General detailed the results of an initiative that his Office launched in 2013 to expand access to mainstream banking for unbanked and underbanked communities. The Office’s initiative, which led to agreements with five banks—Chase, Citibank, Capital One, Santander, and, most recently,Amalgamated—has transformed the way banks around the state screen consumers who apply for checking accounts and permitted thousands of consumers to open their first checking accounts. In today’s letter, the Attorney General urged other banks operating in New York State to follow the lead of these five banks by adopting a set of best practices to govern their own applicant-screening policies.

More than two million households in New York State lack access to mainstream bank accounts. As a result, they are forced to rely on high-cost alternative financial services, including non-bank money orders, check-cashing outlets, and pawnshops. Alternative financial services place consumers at an economic disadvantage because they come with higher fees and interest rates, while mainstream financial institutions make it easier for consumers to save money, avoid fraud, pay bills, qualify for loans, and build and protect wealth. African-American and Hispanic consumers are disproportionately represented among the population of consumers who lack access to mainstream financial services.

As part of the initiative to expand access to mainstream banking for unbanked and underbanked communities, the Office examined the methods that banks use to screen applicants for checking accounts. The examination revealed that the use of consumer-screening agencies like ChexSystems, Inc. and Early Warning Services, LLC causes some banks to unnecessarily reject many thousands of applicants throughout the state. In particular, many financial institutions reject applicants for minor financial missteps, even when those missteps occurred years ago, involved de minimis amounts, or otherwise did not reflect a consumer’s ability to pay responsibly.

In agreements signed with the Attorney General’s Office, Chase, Citibank, Capital One, Santander, and Amalgamated, which collectively control nearly 50% of the depository market share in New York State, committed to taking a variety of steps to curtail their use of such screenings. While they will continue to screen applicants for identity verification and fraud history, they have significantly reduced or eliminated the number of applicants rejected on the basis of past financial missteps. The latest bank to sign such an agreement is Amalgamated Bank, which, like the previous four banks, will adopt new policies governing its use of ChexSystems.

“It is critical that low-income Americans—and New Yorkers in particular—have access to mainstream banking services,” Attorney General Schneiderman said. “These new actions on the part of Amalgamated, and those of the other four banks that have already undertaken similar changes will help expand access to low-cost financial services available to the benefit of consumers across the state. I have sent letters today to the other banks in the state requesting that they look closely at the benefits that would accrue to the people of the state, as well as to their institutions, if they were to adopt similar changes to their account screening procedures.  I look forward to working with the other banks to follow the lead of Amalgamated, Chase, Citibank, Capital One and Santander.”

Amalgamated uses ChexSystem to screen consumers who apply for checking accounts.  Amalgamated has modified its screening procedures to further expand access to certain consumers who have resolved or paid off prior accounts that were overdrawn.  Consumers who do not qualify for a regular checking account will generally not be rejected outright, but instead will be offered a limited account which does not provide for overdrafts.

The Attorney General’s letter is being sent to the following banks:

·         Manufacturers and Traders Trust Co.

·         TD Bank, NA

·         Keybank NA

·         First Niagara Bank

·         Community Bank NA

·         HSBC Bank USA, NA

·         Citizens Bank, NA

·         New York Community Bank

·         NBT Bank

·         People's United Bank, NA

·         Trustco Bank

·         Apple Bank for Savings

·         Sterling National Bank

·         Five Star Bank

·         Berkshire Bank

·         Valley National Bank

·         First National Bank of Long Island

·         Bridgehampton National Bank

·         Ridgewood Savings Bank

·         Chemung Canal Trust Co.

·         Glens Falls National Bank & Trust Co.

·         Signature Bank

·         Hudson City Savings Bank

·         Investors Bank

·         Suffolk County National Bank of Riverhead

·         Canandaigua National Bank & Trust Co.

·         Dime Savings Bank of Williamsburg

·         Northfield Bank

·         Flushing Bank

·         Adirondack Bank

·         Northwest Bank

·         Bank of Castile

·         Pioneer Savings Bank

·         Woodforest National Bank

·         PCSB Bank

·         Putnam County Savings Bank

·         Evans Bank

·         Mahopac Bank

·         Steuben Trust Co.

·         Bank of Greene County

·         Cathay Bank

·         Elmira Savings Bank

·         Ponce De Leon Federal Bank

·         Oneida Savings Bank

·         Tompkins Trust Co.

·         Ulster Savings Bank

·         Catskill Hudson Bank

·         Jeff Bank

·         Rhinebeck Bank

·         Adirondack Trust Co.

·         Lyons National Bank

·         National Bank of Delaware County

·         Lake Shore Savings Bank

·         Tioga State Bank

·         Walden Savings Bank

·         Alma Bank

·         Ballston Spa National Bank

·         Carver Federal Savings Bank

·         First Central Savings Bank

·         First National Bank of Scotia

·         Pathfinder Bank

·         Watertown Savings Bank

·         Champlain National Bank

·         First American International Bank

·         First Republic Bank

·         Generations Bank

·         Orange County Trust Co.

·         Saratoga National Bank and Trust

·         Solvay Bank

·         National Union Bank of Kinderhook

·         Cattarugus County Bank

·         National Bank of Coxasckie

·         Webster Bank, NA

·         Fulton Savings Bank

·         Bank United, NA

·         Country Bank

·         Cross County Savings Bank

·         East West Bank

·         Gold Coast Bank

·         Maspeth Federal Savings & Loan

·         Salisbury Bank & Trust Co.

·         Shinhan Bank America

·         American Community Bank

·         Bank of Akron

·         BBCN Bank

·         Empire State Bank

·         Fairport Savings Bank

·         Greater Hudson Bank

·         Northeast Community Bank

·         Savannah Bank NA

·         North Country Savings Bank

·         Victory State Bank

·         The Berkshire Bank

·         Putnam County National Bank of Carmel

·         Metropolitan Commercial Bank

·         Emigrant Bank

·         Rondout Savings Bank

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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