According to the Consumer Financial Protection Bureau (CFPB), one American household in ten doesn’t have a checking account, and the bureau wants to ensure that all households gain access if they want to. Recently, the CFPB sent a letter to the country’s 25 largest retail banks asking them to offer low-risk deposit accounts that limit overdraft problems. For context, the CARD Act, passed in 2009, greatly reduced the impact of bank over-limit fees on consumers. Borrowers with lower credit scores now save nearly $60 annually in fees they would have otherwise paid before the act.
Nevertheless, just because ten percent of households have a checking account doesn’t mean that so many workers do. Increasingly, low-wage workers receive their pay in the form of payroll cards, discussed here, which charge users fees to access their own money. Consequently, better checking-account access can improve the likelihood of being paid via direct deposit, which is probably the most reliable way of getting paid nowadays. It’s certainly safer than converting a payroll card into cash.
The CFPB’s letter asked the 25 banks to offer deposit accounts that limit the possibility of account over-drafts. Usually, if a depositor overdraws an account, the bank will allow the transaction to go through, but it will charge a penalty fee and deduct the overdraft amount from the depositor’s next deposits until the overdraft is cleared. In tight situations, depositors might run into trouble because they don’t deposit enough money in time for their next automatic withdrawal, e.g. for a mortgage, putting them behind on their bills.
The CFPB would prefer under-banked Americans to use deposit accounts that do not allow overdrafts at all, simply declining depositors the purchase they were trying to make. The CFPB is also concerned that large banks do offer these kinds of products but don’t advertise them prominently to consumers. Banks don’t make much money on accounts they can’t penalize for overdraft fees.
The bureau also issued a bulletin to banks and credit unions advising them to put safeguards in place to ensure that negative account information is accurately transmitted to outside parties, namely credit unions.
The CFPB’s press release can be found here, and its resources for selecting a lower-risk account can be found here (pdf).
Penalty fees and lack of account access can damage consumers, possibly even contributing to insolvency, so it’s good for them to be able to gain the benefits of the banking system without the substantial costs. If you are running into financial difficulties, then talking to an experienced New York bankruptcy lawyer can help.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced New York bankruptcy Bruce Weiner for a free initial consultation.
