Checking Accounts for People on ChexSystems
According to the Federal Trade Commission, there are 10 million households in America that are unbanked, which means they don't have accounts at banks or other financial institutions. If you've had a negative account history with a bank, you may find yourself among this group if that bank reported you to ChexSystems.
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Identification
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ChexSystems is a credit bureau that maintains information on consumers who have bounced checks, committed bank fraud or had some other negative occurrence with a bank, such as unpaid overdrafts that caused the bank to close your account. A record in ChexSystems can negatively impact your financial life. Banks and other financial institutions report consumers to ChexSystems and once ChexSystems has a report on you, that information will remain in the ChexSystems database for five years.
Effects
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When you apply to open a checking account, the financial institution you apply to will often pull a ChexSystems report. If you have a record in ChexSystems, most traditional banks will not open an account for you. According to Bankrate.com, one drawback of ChexSystems is that the bureau does not make a distinction between a consumer reported due to a simple mishandling of his account and the person who tried to commit bank fraud. As such, any record in ChexSystems often will cause a bank to decline your application for a checking account, even if you've paid the amount owed. According to ChexSystems, paying a debt reported to ChexSystems doesn't remove it from their database.
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Considerations
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Banks want to eliminate fraud. According to Bankrate.com, about 80 percent of banks and credit unions belong to the ChexSystems network. That's an overwhelming majority, which can make obtaining a new checking account difficult if you have a ChexSystems record. Some banks offer second chance checking, which allows you to open a checking account in spite of a ChexSystems report. According to Compass Bank, consumers can open its Basic Checking Account even if they've had trouble opening bank accounts in the past, for example.
Prevention/Solution
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It's advantageous to stay out of ChexSystems altogether. To avoid a possible ChexSystems report, don't write a check unless the money is in the account to cover it, according to Bankrate.com. Also, before you close an account, ensure that all fees have been paid and any outstanding checks or automatic debits have cleared or terminated. In addition, according to ChexSystems, if you cosign on an account that is mishandled by the other party, the bank can hold you responsible for the negative activity associated with that account as well.
The Law
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Like all credit bureaus, ChexSystems is governed by the Fair Credit Reporting Act (FCRA). The FCRA gives you specific rights when it comes to your consumer credit report. The Fair and Accurate Credit Transactions Act (FACTA), an addendum to the FCRA, gives you the right to receive one free copy of your ChexSystems report. You can order the report online at the ChexSystems website: consumerdebit.com. If there's an error on the report, the FCRA allows you to file a dispute with ChexSystems. You can submit your written dispute by mail or fax using the contact information found on the ChexSystems website or on your ChexSystems credit report. Investigations can take up to 30 days.
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