The Consumer Financial Protection Bureau hit JPMorgan Chase with a $4.6 million penalty for failures related to information it provides for checking account screening reports.
Under the current process, the bureau explained that banks screen potential customers based on reports about prior checking account behavior created by consumer reporting companies.
Banks, like JPMorgan Chase, that supply information for those reports are legally required to have proper processes in place for reporting accurate information.
The CFPB said 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.
As a result, the bureau is ordering Chase to pay a $4.6 million penalty and implement necessary changes to its policies to prevent future legal violations.
“Since identifying the issue three years ago, we’ve significantly improved our procedures for sharing information with agencies,” a JPMorgan Chase spokesperson said.
Chase furnishes information about its checking accounts to nationwide specialty consumer reporting companies, which includes Chex Systems and Early Warning Systems.
The companies then 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.
According to the CFPB, Chase broke the law by failing to comply with its obligations outlined in the Fair Credit Reporting Act.
In addition, the CFPB stated that Chase 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.
Under the enforcement action, JPMorgan Chase must now: Ensure accurate information is reported; inform consumers of investigation outcomes; provide consumers with contact information; and pay a $4.6 civil money penalty.
JPMorgan Chase is one of the top players in the mortgage finance space, coming in as the second biggest lender in 2015, according to Bankrate. According to the bank’s latest second-quarter earnings report, mortgage banking net revenue came in at $1.4 billion.
“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.”
More details on the enforcement action can be found here.