CFPB Takes Action Against JPMorgan Chase for Failures Related to Checking Account Screening Information

Bureau’s Order Requires Bank to Pay $4.6 Million Penalty

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against JPMorgan Chase Bank, N.A. for failures related to information it provides for checking account screening reports. Banks screen potential customers based on reports about prior checking account behavior created by consumer reporting companies. Banks that supply information for those reports are legally required to have proper processes in place for reporting accurate information. Chase did not have these processes in place and kept consumers in the dark about the results of their reporting disputes and key aspects of their checking account application denials. The Bureau is ordering Chase to pay a $4.6 million penalty and implement necessary changes to its policies to prevent future legal violations.

“Information about checking account behavior is used to determine who can open a bank account,” said CFPB Director Richard Cordray. “Because Chase did not have the required processes to report this information accurately, and kept consumers in the dark about reporting disputes and application denials, the Consumer Bureau is imposing a $4.6 million penalty and other measures to stop these violations in the future.”

Chase is a national bank based in Columbus, Ohio that provides numerous consumer financial products and services, including checking and savings accounts, money market accounts, mortgages, personal loans, credit cards, and auto loans. Chase furnishes information about its checking accounts to nationwide specialty consumer reporting companies. These companies which include Chex Systems and Early Warning Systems, collect and report negative information about consumer checking accounts, such as whether an account was closed due to an unpaid negative balance or due to suspected fraudulent activity.

The Bureau found that Chase broke the law by failing to comply with its obligations outlined in the Fair Credit Reporting Act by not having adequate policies in place regarding the accuracy of information it reported about consumers’ checking account behavior. Chase also failed to provide consumers who disputed their information with the results of its investigation, and failed to tell certain consumers which consumer reporting company supplied the information that resulted in Chase’s denial of their checking account application. Specifically, Chase:

  • Failed to have adequate processes for accurately reporting checking account information: Chase failed to establish and implement reasonable policies and procedures for reporting information about consumers’ deposit accounts. Without adequate policies and procedures, there is a risk that a financial institution may report inaccurate information about consumers’ checking account history.
  •  Kept consumers in the dark about the results of their disputes: Consumers have the right to dispute what they believe to be inaccurate information on their consumer reports with the company that supplied it. These companies are required by law to provide consumers with the results of investigations into their disputes. Between July 2010 and December 2014, Chase failed to provide this very basic service to thousands of its customers who were left in the dark about the disputes they filed with Chase.
  • Kept consumers in the dark about key aspects of their checking account application denials: Financial institutions are required to provide consumers with the name and contact information of the consumer reporting company that supplied any information that they use to deny a consumer’s checking account application. Between October 2014 and February 2015, Chase sent denial notices to approximately 17,500 checking account applicants. These notices failed to identify the name and contact information of the nationwide specialty consumer reporting company that supplied the information upon which Chase’s denial was based.

Enforcement Action

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws. Under the terms of the CFPB order released today, Chase is required to:

  • Ensure accurate information is reported: Chase must implement reasonable policies and procedures regarding the accuracy of information on consumers’ checking account behavior that it sends to consumer reporting companies.
  • Inform consumers of investigation outcomes: Chase must report the results of its investigations to consumers who filed disputes with the bank regarding the information reported about them to consumer reporting companies.
  • Provide consumers with contact information: Chase must provide consumers with the contact information of the consumer reporting company that supplied information that Chase used to deny an application for a deposit account.
  • Pay a $4.6 civil money penalty: Chase must pay a $4.6 million penalty to the Bureau’s Civil Penalty Fund.

The text of the consent order can be found here: http://files.consumerfinance.gov/f/documents/201708_cfpb_JPMorgan-Chase_consent-order.pdf

Information on how to obtain reports from specialty consumer reporting companies can be found at http://www.consumerfinance.gov/askcfpb/2035/How-do-I-get-a-copy-of-the-report-banks-use-to-decide-whether-to-let-me-open-a-checking-account.html

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers  to take more control over their economic lives. For more information, visit consumerfinance.gov.