Citibank Reaches Pact With New York on ChexSystems Data

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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