Over a Million Are Denied Bank Accounts for Past Errors

By JESSICA SILVER-GREENBERG, NYT

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.

(More here.)