WebQuest: What's New With Checking Accounts?

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Feb 06, 2016
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Credit Scores, Policy, Research, WebQuest, Checking Accounts, Payment Types, New Products, Current Events

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Flurry of news articles recently about checking account changes proposed by the Consumer Financial Protection Board (CFPB). Good opportunity to mix policy analysis with an understanding of checking account features (also might want to mix in the Spent documentary (from minute 7:00 – 13:00) which vividly demonstrates the cost of being unbanked.  Ask students to identify the main elements of the CFPB proposal and whether they think this is a good idea. If you want to spice this up a little, have students debate the issue with one side taking on role of the CFPB and the other taking the perspective of the banks.

Here are a few articles to get your students started:

  • From the Consumerist, which described how the CFPB proposal would seek to limit overdraft charges:

In an attempt to increase the number of Americans using deposit accounts while cutting down on the billions of dollars in overdraft charges consumers are hit with every year, the CFPB sent letters to 25 of the nation’s largest banks, urging them to create or promote deposit accounts designed to meet consumers’ financial needs.

According to the letters [sample PDF], the new accounts should not authorize users to spend more money than they have, effectively eliminating the possibility of overdraft charges for consumers. It also means the banks would not be at risk for funding transactions that the customer’s account couldn’t cover.

  • From NY Times, which described the screening process which can make it difficult for some to get a checking account:

BANKS must do more to make sure they are not unnecessarily thwarting customers who want to open mainstream bank accounts, a federal watchdog agency warned this week.

The agency, the Consumer Financial Protection Bureau, told the nation’s retail banks and credit unions that they must act to provide accurate information to specialized screening companies, which track a consumer’s record of overdrawn and closed checking accounts.

Such companies collect information from banks on accounts that are overdrawn or involuntarily closed, perhaps because the holder overspent the balance and did not repay the money. When the customer applies for a new bank account, the companies provide a report, which may lead a bank to reject the application. So it is important that the report details are correct.

  • The Hill, had a quote from CFPB Director Cordray noting how financial innovation, like prepaid cards, now offer features similar to checking accounts

Financial regulators are pushing banks and credit unions to improve consumer access to low-risk checking accounts. The Consumer Financial Protection Bureau (CFPB) will announce Wednesday a plan to urge the nation’s 25 largest retail banks for offerings without overdraft fees.

“These safer products do not even have to be checking accounts as we typically know them,” CFPB Director Richard Cordray will say, according to prepared remarks. “Many general purpose re-loadable prepaid cards are specifically designed to help consumers manage their spending while limiting their transactional costs and risks.”

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.