Capital One will curb its use of data base to screen customers: other financial institutions urged to follow
An agreement between Attorney General Eric Schneiderman and Capital One could pave the way for more unbanked New Yorkers to enter the banking system.
Many low-income city residents have no access to banks, forcing them to resort to expensive check cashing stores.
As many as 825,000 New Yorkers don’t have a bank account, according to a 2010 city study. In two neighborhoods alone – Jamaica, Queens, and Melrose, Bronx – residents spent more than $19 million per year on check cashing fees.
A big problem: Banks use a credit bureau called ChexSystems, and others, to provide data on the banking history of customers who apply for bank accounts.
Banks will deny customers based on past, small offenses, like checking overdrafts, that show up on the reports. The practice has disproportionately hurt lower-income customers.
But on Monday, Capital One and the AG’s office said the bank will no longer use ChexSystems to do background checks to look for anything other than fraud. The AG is pushing for other banks to do the same.
“No one, least of all struggling New Yorkers, should be forced to rely on high-cost alternatives to banks just because they bounced a check or were a victim of identity theft,” Schneiderman said in a statement.
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