CFPB Takes Aim at Deposit Accounts and Credit Reporting

In last fall’s SupervisoryHighlights, the CFPB expressed concerns with depository institutions who furnish information on deposit accounts, noting that while they had policies and procedures in place to insure accuracy of their reporting on credit accounts, many did not have similar policies and procedures in place to address furnishing information on deposit accounts.  This week it became clear that this issue is part of a more global concern of the CFPB – the millions of households that the CFPB contends are currently “unbanked.”  In a three pronged attack, the CFPB has made clear that it believes that banks are underserving a portion of the banking population who either do not want accounts that provide overdraft protection or are being rejected from the banking system because they have a poor depository account history. In his prepared remarks, Cordray was critical of the use of overdraft protection, stating that “overdraft programs have become a significant source of industry revenues, and a significant reason why may consumers incur negative balances.”  Cordray’s comments went on to make clear that the Bureau believes credit reporting inaccuracies and a lack of nonoverdraft products are at the root of the problem.

LETTER TO FINANCIAL INSTITUTIONS

Cordray announced that as part of the CFPB initiative to attack this problem he sent a letter to leading retail banks imploring them to: (a) create depository products that are “lower risk” (b) to the extent they already have such products, that they better market them by featuring them among their standard offerings. While the letter is “not being sent in reference to any sort of regulatory requirement”, it is a strongly worded “suggestion.”

 CFPB COMPLIANCE BULLETIN 2016-01

At the same time, the CFPB issued a Bulletin warning “banks and credit unions that they must have systems in place regarding accuracy when they pass on information, such as negative accounts histories, to checking account reporting or other credit reporting companies.”  See ConsumerFinancial Protection Bureau Takes Steps to Improve Checking Account Access. Echoing the issues identified in the fall Supervisory Highlights, the Bulletin reminds banks and credit unions that as furnishers of information under the FCRA:

• They are required to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information relating to consumers that they furnish to consumer reporting agencies, including specialized consumer reporting agencies;
• The policies and procedures should be appropriate to the nature, size, complexity and scope of the furnisher’s activities;
• The policies and procedures should insure the accuracy and integrity of all furnished information; and
• This obligation applies to all furnishings, including the furnishing of deposit account information.

In his prepared remarks, Cordray also made it clear that the CFPB intended to scrutinize the consumer reporting agencies, including those that track deposit accounts, to insure they are accurately reporting information and dealing effectively with consumer disputes.

CONSUMER GUIDES

Finally, the CFPB issued three consumer guides: (a) “Consumer Guide to Being Denied a Checking Account”; (b) “Consumer Guide to Managing Your CheckingAccount”; and (c) “Consumer Guide toSelecting a Lower-Risk Account”.  Significantly, the first is focused on consumer’s rights under the FCRA and reminds consumers that if they are denied an account, they should make sure the bank or credit union provides the name of the consumer reporting agency who provided the information.  The Guide additionally provides consumers with information as to how to dispute any inaccurate information.

TAKE AWAYS FOR BANKS AND CREDIT UNIONS

Banks and credit unions should take this opportunity to review their policies and procedures regarding both overdraft products and their credit reporting as to depository accounts.  The CFPB has made very clear that they do not like overdraft products and it is likely that they will continue to receive regulatory scrutiny for the foreseeable future.  Secondly, the regulators are now focused on credit reporting policies and procedures across all products.  A one size fits all policy is likely to receive particular scrutiny from regulators.  Banks and credit unions should review their credit reporting and credit denial policies to insure they are appropriate based upon each product they are credit reporting and tailor them accordingly.