Under the leadership of Treasurer José Cisneros, the San Francisco Office of Financial Empowerment (OFE) strives to ensure that every San Franciscan has access to a safe and affordable bank account. Unbanked rates have fallen both locally and nationally, yet many of our residents continue to live outside of the financial mainstream, relying on expensive and often predatory fringe financial services. Research from the Federal Deposit Insurance Corporation (FDIC) finding that nearly 50 percent of unbanked people were previously banked led OFE to embark on a research initiative to better understand why some consumers – especially those with a past banking history – remain unbanked.
This initiative revealed deep problems associated with bank account screening consumer reporting agencies, which provide financial institutions with (mostly negative) information about people’s banking histories and are used by banks and credit unions to decide whether to allow someone to open an account. OFE examined how account screening practices contribute to financial exclusion, focusing on the use of ChexSystems, one of the two agencies that dominate this industry. Following consumer and stakeholder interviews and surveys and review of ChexSystems reports for financial coaching clients, OFE found numerous flaws with the system’s current design and implementation, including a lack of consumer awareness, unfair and unequal outcomes, and a dispute resolution process that is nearly impossible to navigate.