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Letter by the Greenlining Institute
sent to the Federal Reserve.
Following are two letters by the Greenlining Institute regarding ChexSystems that were sent to the Federal Reserve and other regulatory agencies. We've formatted it in HTML so that it can be displayed in your browser but you can download their original documents: Sep-28-2000 and Aug-02-2000 which are in MS Word format.


September 28, 2000

Chairman Alan Greenspan
Chairman
Federal Reserve System
20th & "C" Sts., NW
Washington, D.C. 20551


Mr. Jerry D. Hawke
Comptroller of the Currency
Office of the Comptroller
250 E St., SW
Washington, D.C. 20219


Ms. Ellen Seidman
Director
Office of Thrift Supervision
1700 G. St., NW
Washington, D.C. 20552


Ms. Donna Tanoue
Chairperson
FDIC
550 17th St., NW
Washington, D.C. 20249


Mr. Robert Pitofsky
Chairman
FTC
600 Pennsylvania Ave.,
NW, Room 440
Washington, D.C. 20580


Mr. Lawrence H. Summers
Secretary
Department of the Treasury
1500 Pennsylvania Ave., NW
Washington, D.C. 20220


Automatic Five Year "Conviction" Encourages Predatory Lending

Dear Chairman Tanoue, Director Seidman, Comptroller Hawke and Chairman Greenspan:

Bringing Five Million Americans Back Into the Banking System:
A Successful Cooperative Effort Among Financial Institutions, Regulators and Community Groups

Dear Chairman Greenspan, Comptroller Hawke, Director Seidman, Chairperson Tanoue, Chairman Pitofsky and Secretary Summers:

Today's Wall Street Journal described Bank of America's leadership effort to move the unbanked into banking and to minimize the pitfalls of the present ChexSystems, a system that has, in effect, prevented five million or more former bank customers from joining the banking system. (article attached)

We strongly applaud Bank of America's clear leadership. They have set a standard that no regulator could possibly set even if it had clear jurisdiction. Greenlining and other community members are also gratified to learn at our meeting of September 28th1 (co-hosted with the Federal Reserve) that the nation's largest thrift, Washington Mutual, and California's second largest bank, Wells Fargo2, intend to follow Bank of America's lead. Similarly, a number of the other nine banks that attended this meeting, such as U.S. Bancorp, Bank of the West and Sanwa, indicated that they were likely to soon do the same.

As OTS and the Federal Reserve remarked at our meeting, this was an excellent example of the effectiveness of financial institutions, regulators and community groups working together, even when there is no clear regulatory framework, to achieve a common goal that makes good business sense. We strongly concur and welcome the opportunity to replicate this informal procedure as it relates to community reinvestment, predatory lending and other issues of common concern.

Our next scheduled meeting, which will be co-hosted by the Federal Reserve, is set for December 5th. Subsequent to that meeting and prior to the end of the year, we hope to provide a joint report to all of you on the initial results of this joint effort to modify the counterproductive aspects of ChexSystems.


1 Participants at the September 28th meeting included Bank of America, Bank of the West, CalFed, Citibank, Sanwa, Union, US Bancorp, Washington Mutual, Wells Fargo, FDIC, Federal Reserve, FTC, OCC, OTS, Operation Hope, Allen Temple and ChexSystems
2 Two weeks prior to this announcement, Washington Mutual and Wells Fargo took the lead in announcing a pilot project with Allen Temple Baptist Church of Oakland to accept, in effect, anyone within ChexSystems as a customer so long as they had not engaged in fraud.

Sincerely,

Robert Gnaizda
Policy Director
Greenlining Institute

[End of Sep-28-2000 letter]


August 2, 2000

Chairman Alan Greenspan
Chairman
Federal Reserve System
20th & "C" Sts., NW
Washington, D.C. 20551


Mr. Jerry D. Hawke
Comptroller of the Currency
Office of the Comptroller
250 E St., SW
Washington, D.C. 20219


Ms. Ellen Seidman
Director
Office of Thrift Supervision
1700 G. St., NW
Washington, D.C. 20552


Ms. Donna Tanoue
Chairperson
FDIC
550 17th St., NW
Washington, D.C. 20249


Automatic Five Year "Conviction" Encourages Predatory Lending

Dear Chairman Tanoue, Director Seidman, Comptroller Hawke and Chairman Greenspan:

Yesterday's Wall Street Journal article ( Bounce a Check and You Might Not Write Another for Five Years ... Do the Poor Get Hurt More?) raises a number of troubling federal regulatory issues that require your instant and collective intervention.

First, are automatic five year bans from the banking system consistent with the role of banks in encouraging a universal banking system?

Second, are these inflexible bans antithetical to recent government efforts to ensure electronic banking for all government payments, particularly for social security and disabled recipients?

Third, do these bans have an unintended discriminatory impact on the poor, inner city residents and minorities, as the NAACP contends?1

Fourth, do these bans unintentionally help create a strong multi-billion dollar predatory "check cashing store" economy since these bans directly drive millions of poor Americans from regulated banks to some of the leading predatory lenders?

Five, are second chance and other flexible methods, such as developed by Union Bank, an effective alternative that, in effect, causes the automatic ban to be unnecessarily discriminatory and counterproductive to safe and sound banking practices?

Six, if, as we believe, there is a clear distinction between fraudulent check writers and destitute families whose loss of a job prevents them from covering a check, should banks develop an alternative to ChexSystems, a national database to which 80% of bank branches subscribe? Suggested Action

We urge that the four primary federal bank regulators call for an immediate Six Month Moratorium on automatic bans. In the interim, we urge that an investigation be conducted as to the impact of ChexSystems on a.) the banking system, b.) low-income, minority and inner city residents, c.) the government's electronic banking efforts; and d.) driving the poor out of the regulated banking system and into the hands of predatory lenders.

Leaders of The National Black Chamber of Commerce will be having their national convention in D.C. from August 17th to 20th. Perhaps we could meet during this time?

In addition, Greenlining and its members (including The National Black Chamber of Commerce, California Hispanic Chamber of Commerce and The National Asian Business Association) will seek to set up a meeting on August 14th in San Francisco with ten major banks2 to discuss interim solutions to this banking crisis. We respectfully request your assistance in ensuring that your top officials attend this meeting.3

We look forward to your early advice and action.


1 The discrimination of two types: a.) denying banking services disproportionately to minorities and the poor, and b.) the likelihood that banks exercise no such inflexible or automatic ban on the wealthy customer, a matter we are prepared to prove.
2 Bank of America, Wells Fargo, Union Bank, Bank of the West, Citibank, City National, Sanwa Bank, Washington Mutual, CalFed and World Savings.

3 Meeting at 2:00 p.m., August 14th at Greenlining Institute, 785 Market St., 3rd floor, San Francisco.

Sincerely,

Robert Gnaizda
Policy Director
Greenlining Institute


Mary Ann Mitchell
Chair of the Board
National Black
Business Council, Inc.


Bert Corona
Executive Director
Hermandad Mexicana
Nacional


Jorge Corralejo
Member
Latin Business
Association


Mark Whitlock
Executive Director
First AME Church


Gelly Borromeo
President
National Asian Pacific
Publishers Association


[End of Aug-02-2000 letter]

The results of the August 14th meeting can be read in the San Francisco Examiner article, Lenders to evaluate their use of a system under fire for bias against poor people and in the Wall Street Journal article Banks to rethink system to approve applicants opening checking accounts.



An article on Sep-28-2000 in the Wall Street Journal, and a
followup article on Oct-02-2000 reports how Bank of America and others have changed their ChexSystems policies. B of A detailed these changes at that day's meeting at the Greenlining Institue.
Highlights:
- will disregard ChexSystems incidents more than one year old if you have proof that "all amounts owed have been paid".
- will disregard all incidents more than three years old regardless of paid status provided no fraudulent activity exists in your report.
- will not report overdraft activity to ChexSystems unless the overdraft balance (including fees, we are assuming) is $100 or more [according to the article, the threshold previously was $50, although we've received feedback from many who were reported by B of A for amounts much smaller than that even.]
- will not report overdraft activity to ChexSystems until 90 days after the overdraft occurred, and will issue notice at 60 days. [according to the article, the time limit previously was to allow 21 days for repayment after the notice was sent, which supposedly is 60 days after the overdraft activity. But we've received feedback from many who were reported by B of A within a few days of the overdraft acitivity. Thus if this 81 day length of time was their previous policy, it wasn't followed whatsoever.]
- eFunds (ChexSystems' parent company, which itself is mostly owned by Deluxe) will be introducing a course in "financial responsibility" to be offered nationwide. Bank Of America plans to offer accounts to anyone who has repaid any amounts owed and completes the course, regardless of how long ago the incident occurred.
And another development:
- At a meeting at the Greelining Institute on Sep-28-2000, several other banks indicated they are likely to follow B of A's lead. This include: Washington Mutual, Wells Fargo Bank, U.S. Bancorp, Bank of the West, and Sanwa Bank.

Thanks to the Greenlining Institute for giving us permission to use their letters on this site.



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