Source - http://dealbook.nytimes.com/
By - JESSICA SILVER
Category - Attractions In Santa Clarita
Posted By - Hampton Inn Santa Clarita
By - JESSICA SILVER
Category - Attractions In Santa Clarita
Posted By - Hampton Inn Santa Clarita
 |
| Attractions In Santa Clarita |
Mistakes like a bounced check or a small overdraft have effectively
blacklisted more than a million low-income Americans from the mainstream
financial system for as long as seven years as a result of little-known
private databases that are used by the nation’s major banks.
The problem is contributing to the growth of the roughly 10 million
households in the United States that lack a banking account, a basic
requirement of modern economic life.
Unlike traditional credit
reporting databases, which provide portraits of outstanding debt and
payment histories, these are records of transgressions in banking
products. Institutions like Bank of America, Citibank and Wells Fargo
say that tapping into the vast repositories of information helps them
weed out risky customers and combat fraud — a mounting threat for banks.
But consumer advocates and state authorities say the use of the
databases disproportionately affects lower-income Americans, who tend to
live paycheck to paycheck, making them more likely to incur negative
marks after relatively minor banking missteps like overdrawing accounts,
amassing fees or bouncing checks.
When the databases were created more than 20 years ago, they were
intended to help banks guard against serial fraud artists, like those
accused of writing bogus checks. Since then, though, the databases have
ensnared millions of low-income Americans, according to interviews with
financial counselors, consumer lawyers and more than two dozen
low-income people in California, Illinois, Florida, New York and Washington.
Jonathan Mintz, the commissioner of the New York City Department of Consumer Affairs,
says banks’ growing reliance on customer databases has frustrated
efforts to help an estimated 825,000 New Yorkers without bank accounts
gain access to the mainstream financial system.
“Hundreds of thousands of Americans are being shut out for relatively small mistakes,” Mr. Mintz said.
As a result, many have no choice but to turn to costly fringe
operations to cash checks, pay bills and wire money. Saving for the
future, financial counselors say, can be especially difficult.
The ranks of those without bank accounts have swelled — up more than 10 percent since 2009, according to the Federal Deposit Insurance Corporation
— as banks have sharpened their focus on more affluent customers who
typically generate twice the revenue of their lower-income counterparts.
Many banks are closing branches in poor areas and expanding in
wealthier ones, according to an analysis of federal data.
Rejection for would-be bank customers can come as a shock. Tiffany Murrell of Brooklyn
says a credit union denied her checking account application in
September 2012 even though she had a job as a secretary and was up to
date on her bills.
