Credit union experts were hesitant to criticize a CFPB plan to review credit union checking account screening, but emphasized screening is needed to prevent fraud and other losses.

On Wednesday, CFPB Director Richard Cordray said the bureau will review financial institution use of consumer reporting agencies like Chex Systems when screening checking account applications. He also said in his prepared remarks he was concerned by reports banks and credit unions disqualified consumers for checking accounts due to certain consmer reporting records, which the CFPB later clarfied to be involuntary account closures and excessive NSF activity.

Phil Tschudy, media relations manager at CUNA Mutual Group, said his firm's insurance policies do not contain specific requirements for checking account screening, but added credit unions should manage risk.

“Our insurance policies, including our fidelity bond, do not have any specific requirements for the credit union to perform due diligence on prospective members seeking to open an account,” he said. “We strongly emphasize the importance of risk management and encourage credit unions to perform due diligence in accordance with the risk management framework they have built for their organization.”

Tschudy also said the CFPB has not contacted CUNA Mutual Group about credit unions' use of consumer reporting agencies like ChexSystems for checking account screening.

NCUA Public Affairs Specialist John Fairbanks told CU Times the NCUA and the CFPB each have a responsibility to protect consumers with the goal of making affordable financial services available, but defended the process of screening checking applicants, calling it an accepted practice. 

“Credit unions need to have procedures in place to manage risk and to comply with Bank Secrecy Act requirements for establishing a prospective account holder's identity,” he said.  “Reviewing an applicant's credit history is an accepted practice prior to opening a checking account, and credit unions generally give applicants opportunities to repair bad credit histories.”

Michael Coleman, NAFCU director of regulatory affairs, defended the checking screening process used by credit unions.

“Screening applicants for share draft accounts can be an important tool for credit unions to mitigate against fraud risk,” he said. “In terms of consumers access to traditional banking products, credit unions have unique relationships with their members, and work with their members to provide them with the types of accounts and products that they want and need, and that make sense for their member.”

Mary Dunn, CUNA senior vice president and deputy general counsel, attended the forum and told CU Times credit unions want to do as much as possible to prevent fraud.

“Credit unions that conduct account screening do so in large measure to protect their other members,” she said. “As consumer financial cooperatives owned by the members, credit unions want to do all they can to minimize fraud against their institutions because the costs of handling issues like fraud are borne by the credit unions' membership.” 

Marvin C. Umholtz, president/CEO of Umholtz Strategic Planning & Consulting Services, said the CFPB's actions could hurt the consumers it is trying to help.

“Federally insured depository institution checking accounts for the unbanked, underbanked, underserved, low-income populations, etc., are never going to fill the gap that is better handled by ApplePay and the Walmart-GreenDot GoBank mobile access alternatives, not to mention the existing check cashers and others,” Umholtz said. 

“The more the CFPB and the strident consumer activist groups mess up the marketplace with restrictions and limitations, the fewer Americans will have access to financial products and services. Rather than promote financial inclusion, the CFPB has been the leading federal agency in aggressively promoting financial exclusion,” he added.