By Daniel Huang
A Citigroup Inc. unit plans to announce Wednesday it will change
its screening processes for checking and savings accounts to be
more forgiving of customers' histories, becoming the second
financial institution to reach such an agreement with New York
Attorney General Eric Schneiderman.
Mr. Schneiderman's office said the requirements previously in
place often adversely affected low-income applicants and forced
them to turn to high-cost alternative financial services.
The new rules, scheduled to begin March 15, will change how
Citibank uses information from ChexSystems, a consumer-reporting
agency that provides records related to customers' checking- and
savings-account histories. They come amid an investigation by the
New York attorney general's office into how large consumer
databases, like those run by ChexSystems, are used by large and
midsize banks across the state.
"No one should be disqualified from access to a bank account
because of a bounced check from the 1990s or because they were a
victim of identity theft," said Mr. Schneiderman in a
statement.
The investigation, which began in the summer of 2013, seeks to
expand the access that unbanked and underbanked communities have to
traditional banking services. In New York state, 9.8% of households
are unbanked, higher than the national average of 7.7%, according
to a study cited by the attorney general's office.
Citibank uses ChexSystems to identify fraudulent activity or
account abuse during the customer-application process.
"By refining our use of ChexSystems, we will expand access to
our products while still promoting responsible finance and
maintaining sensible safeguards against fraud and account abuse," a
Citi spokesman said.
A representative for ChexSystems couldn't be reached for
comment.
Under the agreement, Citibank will modify its screening criteria
and only decline applicants if they have two or more reported
incidents of account abuse in recent years, the total combined loss
from those incidents exceeds $500 and the losses remain unpaid.
Citibank's agreement follows a similar pact that Capital One
Financial Corp. reached with Mr. Schneiderman's office in June
2014.
Similar agreements with additional banks are expected to be
reached "in the very near future," said a spokesman for the
office.
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