Citigroup has agreed to change its policies that prevented low-income consumers from opening checking and savings accounts.
The $1.9 trillion-asset company said Wednesday that it will update its use of ChexSystems, a consumer reporting agency that analyzes the banking history of consumers who apply for bank accounts.
A probe by New York Attorney General Eric Schneiderman revealed that customers who are considered by ChexSystems to present a credit or fraud risk have trouble opening accounts with banks and credit unions. Schneiderman's investigation found that ChexSystems and other similar databases cause lower-income applicants to turn to higher-cost alternative financial services like check-cashing outlets.
"No one should be denied access to a bank account because of a bounced check from years ago or because they were a victim of identity theft," Schneiderman said in a press release. "Denials like these force low-income Americans... to resort to high-cost alternatives to banks, simply because of a small financial error in the past."
The industry has wrestled with the issue for years. Capital One Financial announced in June that it would overhaul its use of ChexSystems.
Citi said it is plans to revamp its "account-abuse" screening so that applicants are not rejected for isolated or minor banking errors, such as paid debts or a small overcharge. The policy changes are expected to take effect in March.
"Citi is deeply committed to financial inclusion, and we share Attorney General Schneiderman's aim to remove unnecessary barriers to banking products and services," a Citi spokesman said in an email. "By refining our use of ChexSystems, we will expand access to our products while still promoting responsible finance and maintaining sensible safeguards against fraud and account abuse."