Henry Meier, the General Counsel of the New York State Credit Union Association, wrote a blog post last week in which he noted the growing sentiment among consumer advocacy groups and the regulators who love them to favor putting the clamps on the nefarious fiends at ChexSystems. As Henry points out, credit unions (and other financial institutions) have been using ChexSystmes for over 20 years to prescreen consumers for potential credit and bank account offers. Notwithstanding the insanity of the subprime mortgage debacle (fostered by non-financial institution originators and their Wall Street bank enablers, by the way), most financial institutions have this funny tendency to want to be repaid money they lend and to have account customers who don't bounce a lot of checks (notwithstanding the popular notion that all banks desire check-bouncers to generate overdraft fees). Well, according to the same folks who fell in love with "disparate impact" in the lending area, that's simply not fair.
Henry links to a lengthy New York Times article that is chock full of state bank regulators and consumer advocacy spokespersons who claims that maintaining a database on people who bounce checks and otherwise stiff banks is preventing poor people and racial minorities from getting bank accounts, all based on the fact that they haven't handled bank accounts responsibly in the past. In other words, they are suffering the logical consequences of their behavior. You can understand how unfair this might be in a world when those who have not are entitled to have simply because...they are.
The article notes that the CFPB is currently investigating whether databases like that maintained by ChexSystems violate the FCRA. The New York State Banking Superintendent is also on the case. The boys and girls at the US Department of Justice can not be far behind.
While conceding that banks don't want to "bank" customers who aren't profitable, and that bouncing checks in light of the recent cut backs on the ability to charge overdraft fees makes such customers potential money losers, the article then gets down to the real reason that banks must overcome their adherence to sound business principles and take the kind of risks that regulators claim to hate: Feelings. Nothing more than feelings.
The sting of being rejected, though, can make lower-income individuals feel like second-class citizens.
“I just don’t understand why they wouldn’t want me,” said Ms. Murrell, the Brooklyn secretary. “It feels unfair.”
There you have it: It's simply "not fair."
The watch words for a new area of banking policy and enforcement actions: Life is not fair, so we'll use the power of the state and federal government to make it fair. Because, after all, no one should have their feelings hurt.