The CFPB issued a bulletin Wednesday warning banks and creditunions that if they fail to meet accuracy obligations whenreporting negative account histories to credit reporting companies,the result could be bureau action.

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Download and read the CFPB's compliance bulletin here.

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The bulletin stated banks and credit unions must have systems inplace to ensure accuracy when they pass on information, such asnegative account histories, to checking account reporting or othercredit reporting companies.

Has the CFPB gone too far with itsrecent compliance bulletin on checking accounts?
Yes. Credit unionsare in compliance and treat members fairly.No. Some creditunions need to shape up and treat members better.OtherPlease Specify:

PollMaker

“The Consumer Bureau will continue to insist, through itsoversight authority, that banks and credit unions furnishinginformation, as well as the consumer reporting companies collectinginformation and selling reports, must comply with their respectiveduties under the law,” CFPB Director Richard Cordray said Wednesdayin prepared remarks for a field hearing in Louisville, Ky., on thematter. “When we see this is not being done, we will takeappropriate supervisory and enforcement actions.”

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Consumer reporting companies that focus on checking accountstypically generate reports on charge-off amounts, pastnon-sufficient funds activity, unpaid or outstanding bouncedchecks, overdrafts, involuntary account closures and fraud, theCFPB said in the bulletin.

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The CFPB added it is concerned about inaccuracies andinconsistent information that financial institutions provide toreporting companies. Banks and credit unions should expect accurateinformation from checking account reporting companies in order tomake fair assessments of deposit account applicants, and if thesystem is tainted with incomplete, inconsistent and inaccurateinformation, they cannot make informed decisions, the bureaunoted.

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“Consumers should not be sidelined out of the basic bankingservices they need because of the flaws and limitations in a murkysystem,” Cordray said in the bulletin. “People deserve to have moreoptions for access to lower-risk deposit accounts that can betterfit their needs.”

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Additionally, the bureau penned a letter to the 25 largestretail banks, calling on the financial institutions to makelower-risk accounts more accessible to more consumers in order tohelp prevent overdrafts.

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“At credit unions, which are member-owned, not-for-profitfinancial cooperatives, members come first. Credit unions workevery day to ensure that their members have the information andservices that will help them meet their financial goals,” NAFCUExecutive Vice President of Government Affairs and General CounselCarrie Hunt said in a statement. “Credit unions remain thebest choice for consumers seeking low- or no-fee checking, and themajority of those offering overdraft services also offeralternatives such as overdraft lines of credit and linked savingsaccounts."

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Pew Charitable Trusts Consumer Banking Project Director SusanWeinstock said, “This letter is an important step in pushingthe banks to offer safe and transparent accounts, but, ultimately,what is most important for protecting consumers will be new CFPBrules on overdraft. Our research makes clear that the bureau needsto move forward with these new rules expeditiously.”

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At Wednesday’s field hearing, Cordray described the audiencesthat need lower-risk deposit accounts. Among them are consumers whoare screened out of potential accounts due to past history issues;consumers who chose to drop out of the banking system due to higherfees “they did not anticipate or, in hindsight, wanted to avoid”;and young adults entering the banking system who are at higher riskof losing control of their spending.

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Cordray added, “Some banks that have added lower-risk accountsto their offering have expressed surprise at the strong uptake theyhave seen from millennials in particular with these accounts.”

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The director said institutions that have unnecessarily limitedtheir product choices “have missed a substantial segment of thepopulation rather than finding a way to include them and helpdevelop their economic potential.”

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By not providing services to young people just entering thefinancial system, financial institutions “may be missing anopportunity to build loyalty and dispel prevailing mistrust of thebanking system,” Cordray said. “That is not charity at all;instead, it is a hard-headed business judgment that takes thelonger view and seizes opportunities to build sustainable customerrelationships.”

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In addition, the CFPB released resources for shopping forlower-risk checking and prepaid accounts that do not authorizeconsumers to exceed their account balances. The CFPB also releaseda consumer advisory on what consumers should do if they have beendenied a deposit account or have an involuntary accountclosure.

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The advisory told consumers how to obtain a copy of theirchecking account history, dispute items with a consumer reportingcompany, dispute items with a bank or credit union that reportedinaccurate information and shop around for lower-risk products.

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Download and read the consumer advisoryhere.

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“The Consumer Financial Protection Bureau is in a uniqueposition to make a difference in improving how the checking accountreporting system actually works,” Cordray said. “We are the onlyfederal financial regulator with the authority to supervise boththe larger depository institutions and the larger consumerreporting agencies for compliance with federal consumer financiallaw. Thus we can consider and address these issues comprehensively,engaging directly with both sets of industry participants.”

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