Policy Changes Will Help Address the Needs of Unbanked and Underbanked Communities
Schneiderman: New Yorkers Should Not Be Forced to Rely on High-Cost Financial Services
NEW YORK – Attorney General Eric T. Schneiderman today announced that JP Morgan Chase Bank, N.A. has committed to modifying its policies to permit consumers greater access to mainstream financial services. Chase has modified the procedures it uses to screen consumers who apply for checking accounts, thereby permitting more consumers to open accounts. Chase, which offers the option of a prepaid debit card, known as the Liquid Card, to consumers who do not qualify for a checking account, will also allow those consumers to pay bills online or have Chase mail checks for them at no additional charge. These changes will enable card users to pay their rent, utilities, and other bills without having to resort to high-cost alternative financial services like check-cashing outlets and money transmitters.
“It is critical that low-income Americans—and New Yorkers in particular—have access to mainstream banking services,” said Attorney General Schneiderman. “These new actions on the part of Chase Bank will help expand access to low-cost financial services for consumers across the state. I look forward to working with additional banks to help consumers avoid financial services laden with fees and other penalties.”
The commitment by Chase comes as part of an initiative launched by the Attorney General in 2013 to expand access to mainstream banking for unbanked and underbanked communities. In earlier agreements with the Attorney General, three major banks—Citibank, Capital One, and Santander—agreed to overhaul their use of ChexSystems, a consumer-reporting agency that screens people seeking to open checking or savings accounts. Such databases disproportionately affect lower-income Americans, often punishing them for relatively small financial errors. As a result, many consumers must resort to alternative banking services to carry out basic financial transactions like cashing payroll checks and paying bills—services that cost them hundreds, if not thousands of dollars each year in extra fees. Those agreements, like today’s commitment by Chase, expanded the array of mainstream financial services available to consumers.
Studies show that more than 3 million New York households are either “unbanked,” meaning that no family member has a bank account, or are “underbanked,” meaning that they have a bank account but also rely on high-cost alternative financial services.
Chase uses a consumer-reporting agency called Early Warning Systems to screen consumers who apply for checking accounts. Pursuant to the Attorney General’s initiative, Chase has modified its screening procedures to further expand access to checking accounts for certain consumers who have resolved or paid off prior accounts that were overdrawn or who were unable to pay back their prior accounts because of a previous bankruptcy. Consumers who do not qualify for a checking account are generally not rejected outright but instead are offered the option of opening a Liquid Card account. Customers who maintain their Liquid Card accounts in good standing for six months are then permitted to open a conventional checking account.
Chase has committed to making changes to the Liquid Card by the fourth quarter of 2015. Those changes will permit consumers to pay bills and mail checks at no additional cost.
This matter is being handled by Assistant Attorney General Melvin Goldberg of the Consumer Frauds Bureau and Special Counsel Jessica Attie of the Civil Rights Bureau. The Civil Rights Bureau, led by Chief Kristen Clarke, is part of the Division of Social Justice, which is led by Executive Deputy Attorney General for Social Justice Alvin Bragg. The Consumer Frauds Bureau, led by Chief Jane M. Azia, is part of the Division of Economic Justice headed by Executive Deputy Attorney General Karla G. Sanchez