New York’s attorney general called on more than 90 banks including units of Toronto-Dominion Bank and HSBC Holdings to revamp customer screening procedures to give poor people better access to financial services.
Following a streak of agreements with several major banks to change how they use screening tools, Attorney General Eric Schneiderman sent letters Monday urging other financial institutions to adopt new standards.
The measure is aimed at helping “unbanked” or “underbanked” populations, which disproportionately include African-American and Hispanic consumers, obtain access to better financial opportunities.
“It is critical that low-income Americans -- and New Yorkers in particular -- have access to mainstream banking services,” Schneiderman said in a statement. In his letters, Schneiderman said he asked banks to “look closely at the benefits that would accrue to the people of the state, as well as to their institutions, if they were to adopt similar changes to their account screening procedures.”
Credit reporting services used to examine would-be customers’ account histories, such as ChexSystems and Early Warning Services, caused banks to reject thousands of applicants for minor problems such as isolated bounced checks, according to Schneiderman.
Once cut off from mainstream banking services, people are often forced to rely on high-cost alternatives such as check- cashing centers and pawn shops, according to Schneiderman.
Earlier, JPMorgan Chase and Citigroup units, Capital One Financial and Santander Bank agreed to make changes to how they use such screening tools. Schneiderman is set to announce a similar accord with a fifth institution, Amalgamated Bank, on Tuesday.
“These new actions on the part of Amalgamated, and those of the other four banks that have already undertaken similar changes will help expand access to low-cost financial services available to the benefit of consumers across the state,” Schneiderman said.
More than 8% of people in the U.S. are “unbanked,” meaning they don’t have a checking or savings account, according to the Washington-based Corporation for Enterprise Development. About 20% are “underbanked,” meaning they have accounts while continuing to rely on costly alternatives, according to the organization.
Schneiderman estimates that more than 2 million households in the state lack access to mainstream bank accounts.