NY Attorney General Calls on Banks to Step Up Efforts to Provide the Poor Access
New York attorney general calls on banks to step up efforts to provide the poor access. New York Attorney General Eric Schneiderman said banks need to do more to allow the 8% of Americans without checking or savings account to get access to banking tools.
Updated 10/27/2015 - New York’s Attorney General called on more than 90 banks, including units of Toronto-Dominion Bank and HSBC Holdings Plc, to revamp customer screening procedures in order to give poor people better access to financial services.
Following agreements with several major banks to change how they use screening tools, Attorney General Eric Schneiderman sent letters Monday urging other financial institutions to adopt new standards.
The measure is aimed at helping more than 2 million households in the state that lack access to mainstream bank accounts including “unbanked” or “underbanked” populations, which are disproportionately represented by African-American and Hispanic consumers.
“It is critical that low-income Americans—and New Yorkers in particular—have access to mainstream banking services,” Schneiderman said in a statement. In his letters, Schneiderman said he asked banks to “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.”
Credit reporting services used to examine prospective customers’ account histories, such as ChexSystems Inc. and Early Warning Services LLC, caused banks to reject thousands of applicants for minor problems such as isolated bounced checks, according to Schneiderman.
Once cut off from mainstream banking services, people are often forced to rely on high-cost alternatives such as check-cashing centers and pawn shops, Schneiderman said.
Capital One Financial Corp agreed in June 2014 to make changes to how it uses such screening tools. Units of Citigroup Inc. and JPMorgan Chase & Co. as well as Santander Bank N.A. followed earlier this year. On Tuesday, Schneiderman announced a similar accord with Amalgamated Bank.
“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,” Schneiderman said.
Keith Mestrich, president and chief executive officer of New York-based Amalgamated, said in a statement Tuesday that "far too many New Yorkers are unbanked because of unnecessary hurdles.”
It is "every bank’s obligation to create easier access to banking,” he said.
As part of its work with Schneiderman, Amalgamated is expanding its "Second Chance" accounts and other affordable accounts, Mestrich said. Second Chance accounts are offered by some banks and credit unions to people looking to rebuild banking relationships after making minor financial mistakes.
Judy Schmidt, a spokeswoman for TD Bank, had no immediate comment. Rob Sherman, a spokesman for HSBC, didn’t immediately return a phone call seeking comment.
More than 8% of people in the U.S. are “unbanked,” meaning they don’t have a checking or savings account, according to the Washington-based Corporation for Enterprise Development. About 20% are “underbanked,” meaning they have accounts while continuing to rely on costly alternatives, according to the organization.
Story originally posted at: http://www.crainsnewyork.com/article/20151027/FINANCE/151029856/financial-institutions-asked-to-do-more-to-reach-the-unbanked