New York - February 20, 2015 - Attorney General Eric T. Schneiderman today announced that Santander Bank, N.A. has agreed to adopt new policies governing its use of ChexSystems, a consumer-reporting agency that screens people seeking to open checking or savings accounts. Santander’s new policies are expected to allow thousands of additional New Yorkers and consumers nationwide to open bank accounts by September 30, 2015. The change comes amid concerns that screenings by ChexSystems and other consumer-reporting agencies, which are used by most of the nation’s banks, adversely affect lower-income applicants and force them to turn to high-cost alternative financial services like check-cashing outlets.
With today’s agreement, Santander now joins Capital One and Citibank as the third bank to commit to overhaul its use of ChexSystems. The three banks operate a combined 613 branches across New York State and 2,822 branches nationwide.
“No one should be denied a bank account because of a bounced check from years ago,” Attorney General Schneiderman said. “Denials like these force low-income Americans—and New Yorkers in particular—to resort to high-cost alternatives to banks, simply because of a small financial misstep in the past. I commend Santander, following Capital One and Citibank, for stepping up and working with us to help eliminate unnecessary barriers to the mainstream financial system. I urge other banks to do the same. For those banks who refuse to cooperate like these have, more aggressive action may be necessary.”
ChexSystems is one of several databases used by some of the nation’s largest banks and credit unions to analyze the banking history of consumers who apply for bank accounts. Customers who are deemed by ChexSystems to present a credit or fraud risk are typically denied the opportunity to open an account. Such databases disproportionately affect lower-income Americans, often punishing them for relatively small financial errors. As a result, many consumers must resort to alternative banking services to carry out basic financial transactions like cashing payroll checks and paying bills—services that cost them hundreds, if not thousands of dollars each year in extra fees. Without access to mainstream financial services, consumers also are denied opportunities to build assets and create wealth and are more vulnerable to theft and predatory lending practices.
Studies show that more than 3 million New York households are either “unbanked,” meaning that no family member has a bank account, or are “underbanked,” meaning that they have a bank account but also rely on high-cost alternative financial services.
According to one study, the New York State average for unbanked households is 9.8%, higher than the national average of 7.7%. Of counties with more than 100,000 households, the study ranks the Bronx as the second most unbanked county in the country and Brooklyn as the eighth most unbanked county. Of cities with more than 100,000 households, Buffalo ranks as the eighth most unbanked city in the country. Of midsize cities – those with 50,000 to 100,000 households – Rochester is the eighth most unbanked. In New York City, according to a 2010 study, more than 825,000 adults did not have bank accounts and, in two neighborhoods —Jamaica in Queens and Melrose in the Bronx—residents spent more than $19 million per year on check-cashing fees.
The Attorney General’s agreement with Santander comes as part of an ongoing investigation by the Attorney General’s Civil Rights and Consumer Frauds Bureaus into the use of consumer-reporting agencies like ChexSystems by major American banks. In the past year, the Attorney General has announced agreements with Capital One and Citibank in which both banks committed to making changes to their use of ChexSystems, moves that, like today’s agreement, expanded banking access for thousands of consumers nationwide.
Although Santander will continue screening customers for past fraud, it will largely eliminate its so-called “account-abuse” screening so that applicants are not rejected for isolated or minor banking errors, such as paid debts or a small overcharge. The changes to Santander’s policies are expected to take effect on September 30, 2015 and will be implemented nationwide.
In addition, Santander has committed $500,000 to publicize the goals of this agreement in low-to-moderate income neighborhoods in New York.
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.
