(CBS News) – For years, lower-income consumers often found it impossible to get basic banking services such as a checking account because banks use a consumer reporting agency’s information to deny such services. That information comes from ChexSystems, which many banks use to flag consumers deemed to pose a credit or fraud risk.
On Wednesday, New York’s attorney general announced a deal with Citigroup (C) to change how the bank uses data from ChexSystems. The result will make checking accounts more accessible in an attempt to reduce the growing ranks of the “unbanked.” Citi’s new policy goes into effect March 15 and applies nationwide.
It’s the second such deal made in New York — the first was with Capital One (COF) — and it won praise from consumer advocacy groups, which have long complained that lower-income consumers were forced to pay onerous fees for checking cashing and such services because they couldn’t open checking accounts.
“Actions by the New York Attorney General, other regulators and the [Consumer Financial Protection Bureau] have been crucial in reining in abusive use of so-called blacklist credit bureaus such as ChexSystems by banks,” said Ed Mierzwinski, consumer program director for U.S. PIRG. “Unlike the big three credit bureaus, ChexSystems reports only negative information.”