Charlette Williams in Queens found that records of past bank overdrafts prevented her from opening a new account.

In her early college years, when Charlette Williams started routinely mismanaging her finances and pushing her checking account balance into the red, she never thought the mistakes would haunt her five years later, she said. Now, she is paying a steep price.

Ms. Williams, a 25-year-old resident of Queens, is one of more than a million Americans who have been effectively blacklisted from the mainstream financial system because they overdrew their accounts or bounced a check — mistakes that routinely bedevil young and low-income consumers, financial counselors say. While Ms. Williams paid back Bank of America the roughly $700 that she owed, a record of her youthful transgressions remains in a vast private database, preventing her from opening a new account.

Residents of two neighborhoods in the Bronx paid more than $19 million each year on check cashing fees alone, according to a 2008 study by New York’s consumer affairs department.

“Even if it’s $20 in fees, that is $20 that isn’t being put aside, and it means that a whole swath of people are at a true disadvantage,” said Joseph Frewer, a financial counselor at Neighborhood Trust Financial Partners, a nonprofit in New York.

Read the rest at