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New York AG says Capital One to use database only to bar fraudsters: NYT


Capital One Financial Corp. has agreed to fundamentally change the way it uses consumer database, ChexSystems, to restrict only customers who land in the database for fraud, the New York Times reported, citing people briefed on the matter.

The deal stems from a broader investigation by NY Attorney General Eric Schneiderman into how U.S. banks use private databases, the newspaper said.

As part of an inquiry, Mr. Schneiderman requested more information from six banks, including Bank of America, Capital One and JPMorgan Chase, sending letters expressing concern that banks might be “improperly denying or otherwise restricting banking access to New York consumers,” the New York Times said.

Databases such as ChexSystems provide data on how consumers handle deposit accounts at banks. A consumer’s ChexSystems report typically contains banking irregularities such as check overdrafts, unsatisfied balances, depositing fraudulent checks, or suspicious account handling.

Such databases were intended to weed out serial fraudsters. However, regulators say banks are screening out potential customers and swelling the ranks of the so-called “unbanked” — the roughly 10 million households in the United States that lack even a basic bank account, according to the NYT.

Other regulators such as the Consumer Financial Protection Bureau are also starting to examine the role these databases play in restricting access to the banking system, the newspaper said.

Capital One and the NY AG’s office did not immediately respond to emails seeking comment outside regular U.S. business hours.