"Most of us barely notice the critical roles our bank or credit union account plays in our daily lives – using our debit card to purchase something, paying our bills, safely depositing our paychecks," Jonathan Mintz, president/CEO for Cities for Financial Empowerment Fund, said. "Yet, millions of consumers are excluded from this basic tool costing them tens of thousands of dollars over their lifetime, not because of a lack of financial education, but because of little-known and deeply flawed account screening consumer reporting agencies."

He added that the report explored the nature of this flawed consumer reporting agency system, and detailed ways in which financial institutions and regulators could meaningfully address legitimate reporting needs consistent with their efforts to expand financial inclusion.

ChexSystems is a subsidiary of the Jacksonville, Fla.-based FIS and Early Warning Services is a Scottsdale, Ariz.-based company owned by a group of banks including Wells Fargo, Bank of America, JPMC, BB&T and Capital One, according to the organization's website.

The report declared that more than 80% of financial institutions – both banks and credit unions – use CRA scores to screen applicants for new accounts. The report also noted while the screenings were originally intended to warn financial institutions of potential fraud, they later began unfairly accusing consumers of account abuse.

"To accuse a consumer of committing 'account abuse' by overdrawing her account is bad enough, given how bank practices have exacerbated overdrafts," National Consumer Law Center staff attorney Chi Chi Wu stated. "But to then shut a consumer out of the banking system for years afterwards is unfair and egregious."

The report attacked CRA screenings on the grounds of accuracy, consistency, proportionality, transparency and inconsistent error resolution. Authors alleged CRAs often misidentify the victims of identity theft or scams as the perpetrators of the fraud, which then causes financial institutions to block them from opening new accounts. They also claimed CRAs lack consistent definitions of what constitutes fraud, account abuse and other negative events, including when to report them.

In addition, they charged financial institutions that use CRA data do not do so with any proportionality, sometimes automatically denying account applications due to negative information and not taking into account the size of the problem or whether it has been resolved.

The report alleged this lack of proportionality stemmed from a lack of transparency in regard to how information is reported to CRAs and how it is used. That also fuels a lack of consistency consumers face when looking to correct errors in their reports, the authors charged.

The National Consumer Law Center and Cities for Financial Empowerment Fund suggested the CFPB draft regulations to oversee CRAs and how their data are used. CRAs are subject to the Fair Credit Reporting Act.

"Financial institutions using CRAs should limit account denials to consumers with a history of actual and narrowly-defined fraud, or permit consumers with negative histories to open accounts with certain conditions, such as overdraft-free accounts," the authors wrote.

Neither FIS nor Early Warning Systems have yet responded to CU Times' requests for comment on the report.