Volume 80, Number 5

November 2005

Blacklisted: The Unwarranted Divestment of Access to Bank Accounts

James Marvin Perez

The ability to thrive in America’s mainstream financial economy is interwined with the ability to maintain a bank account. Yet, recent studies show that millions of American families do not own a bank account. While studies have pointed to various reasons behind this phenomenon, relatively little attention has been given to the banking industry’s own exclusionary policies regarding bank accounts. This Note critiques financial institutions’ use of an obscure credit reporting agency called ChexSystems. A bank reports an account to ChexSystems if it deems the account to be a “problem.” Each bank has discretion as to what constitutes a “problem” account. Research has shown that this discretion has permitted banks to report accounts to ChexSystems for very modest sums. Problematically, if an applicant appears in ChexSystems when attempting to open a new account, evidence has shown that most banks would deny that applicant a checking account for a five-year period, effectively blacklisting the applicant from mainstream financial institutions. In turn, these rejections force many families to rely on expensive alternatives to meet their day-to-day financial needs. In this Note, James Marvin Pérez posits that we must seriously question the banking industry’s use of ChexSystems. In light of historical banking practices, Mr. Pérez argues that ChexSystems may act as a pretext for discriminatory behavior among banks to exclude unwanted clientele. Additionally, Mr. Pérez explains that ChexSystems disproportionately punishes many consumers who have made only trivial mistakes. He offers additional factors for a bank to consider other than an applicant’s ChexSystems report when evaluating that applicant for an account. Finally, exploring federal legislation, Mr. Pérez ultimately advocates employing the Community Reinvestment Act (CRA) as a legislative tool to combat the apparent deficiencies with ChexSystems in order to bring millions of families back into America’s mainstream financial economy.