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Here's the New Way the Government Will Help You Avoid Bank Fees

Feb 03, 2016

The Feds want to make it easier for Americans to be able to get checking accounts and avoid overdraft fees that can drive them into the red. On Wednesday, Consumer Financial Protection Bureau director Richard Cordray said that his agency had issued notices to the 25 biggest banks, telling them to make it easier for people to get checking accounts. He also warned banks that they have to report negative account activity accurately, or the Bureau could step in and take action.

Although many people never realize it, there are credit reporting bureaus that focus specifically on bank account histories. If you bounce a check or let your account go into the red and abandon it — involuntary account closure, in banking jargon — these bureaus keep a record of that activity, which can make it hard to get a bank account again in the future. Cordray said the CFPB was worried that too many people get unfairly blacklisted and don't have the knowledge or tools to appeal their case.

"The qualification process can be confusing and opaque," he said. "Until they are rejected for a bank account, people often do not know that their prior account usage has been recorded and shared with other institutions."

Shut out of the mainstream banking system, these people are often pushed to products that operate with little oversight and loads of fees.

"People who want the benefits and convenience of some kind of deposit account deserve a fair opportunity to have one," Cordray said. Banks and credit unions have an obligation to provide accurate and up-to-date information to these credit bureaus, he added, saying, "We are concerned that some people are being inappropriately sidelined."

The CFPB also said financial institutions should make it easier for customers to avoid overdraft fees, which is often the trigger that culminates in their account being closed and kicks them out of the banking system. Cordray noted that most of the biggest financial institutions don't promote no-overdraft options to consumers, even though this could potentially spare them from having to pay significant fees. "If consumers do not know about a product," he said, "they cannot be expected to sign up for it."

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