If you've been denied access to opening a checking account, a Capital One announcement may provide some promising news. The banking giant has entered into an agreement with New York Attorney General Eric T. Schneiderman to stop using information from ChexSystems to predict whether consumers present credit risks. While Capital One will continue to look for past fraudulent crimes in a prospective account holder's history, smaller issues will no longer play a role in approving the new account.
"No one -- least of all struggling New Yorkers -- should be forced to rely on high-cost alternatives to banks just because they bounced a check or were a victim of identity theft," Attorney General Schneiderman said. "Equal access is the least we can do to ensure that all New Yorkers have access to widely used services such as our nation's banking system."
That lack of equal access has proven very costly for consumers who rely on alternative financial services such as check-cashing services and prepaid cards. In fact, a 2010 study shows that in the Jamaica neighborhood in Queens and the Melrose neighborhood in the Bronx, residents shelled out a whopping $19 million per year in check-cashing fees.
Those expenses have been adding up around the country, too. According to the Federal Deposit Insurance Corp., approximately 17 million Americans do not have traditional bank accounts. While this agreement was struck in New York, Capital One says it plans to implement the practice nationwide. The move already has earned plenty of positive reviews from organizations committed to helping the unbanked population.
"Today's announcement is an important step in the process of reforming how the big banks serve low-income consumers," said Justine Zinkin, CEO of New York-based financial counselor Neighborhood Trust Financial Partners. "At Neighborhood Trust, our clients are regularly denied basic banking services because of errors in ChexSystems or identity theft, and it is nearly impossible to correct these inaccuracies."
Other banks may follow Capital One's lead. The Attorney General is currently looking at how other institutions use ChexSystems and other databases for screening account applicants.
Worried that you might have trouble opening a new checking account? Check out "Opening a bank account with bad credit."