Little Rock I hate to say “I told you so,” but of course, I in fact did tell you so, when I recently warned that banks for any reason or no reason at all can refuse to continue to allow you to have a checking account or bounce you out of their customer line. A recent article in the Times confirms that in fact the level of what used to be called the “unbanked” has risen by 10% since 2009 according to the Federal Deposit Insurance Commission (FDIC).
And, yes, “unbanked” does sound like the “undead.” You may be walking and talking, but you are also doing a lot more of it and paying a premium to pay your bills, transfer money, and handle daily affairs because banks won’t let you have an account. This is actually a fairly new phenomenon. Only a couple of years ago if we were meeting with bankers and said that we needed to continue to reduce the level of the unbanked among lower income Americans, all of the bankers at the table would reflectively nod in agreement.
No more it seems. Big data is dunning the poor. Minor mistakes, like a one off overdraft can lead to people being blacklisted. According to the Times:
The largest database, founded in the 1970s, is run by ChexSystems, a subsidiary of FIS, a financial services company in Jacksonville, Fla. Subscribers — Bank of America, JPMorgan Chase, Citibank and Wells Fargo among them — “regularly contribute information on mishandled checking and savings accounts,” ChexSystems says on its Web site. “A consumer may dispute any information in their file and ChexSystems will facilitate the resolution of the dispute on the consumer’s behalf,” the company said in a statement. A rival, Early Warning, which is owned by Bank of America, BB&T, Capital One, JPMorgan Chase and Wells Fargo, says roughly 80 percent of the 50 largest American banks pay a fee to subscribe to its deposit-check service.
The banks claim this all began as an attempt to stop fraud, but that’s not really true. Bankers have been honest with us for years that the old school checking account part of their business was a money loser and in fact a loss leader. Here comes big data that can collect every misstep by a poor Joe or Jane along the road, and wham, that’s all it takes to push them into all of the financial predators lying in wait for the poor.
Good luck with resolving the disputes as well, that is if you know there is one.
The article claims that, “Banks are required to provide a reason for rejecting an applicant,” but I’ve read some of the documents that banks put out, and I’m not sure that is really true, and if true, it’s certainly not enforced.”
But all of these financial institutions are federally or state chartered. The FDIC insures each account for a hundreds of thousands of dollars. There is huge governmental leverage here that should be reminding banks that they are in the service business not just the get-rich-quick-business. If they want to stop fraud, good on them, though they might spend more energy supervising some of their own practices, and trying to hard handle someone whose check clears faster than the bank gets around to recording their deposit.