Banking, ChexSystems,
July 26, 2020

ChexSystems Overview – How to Go About Things?

Gregory Weiss
ChexSystems Overview – How to Go About Things?

Many people fail to pay back their overdraft on time. ChexSystems is a consumer credit reporting agency used by banks and credit unions to find out the financial history of people applying for checking and savings accounts. It is governed by the federal Fair Credit Reporting Act (FCRA) and other laws. Roughly 80 percent of the banks and credit unions in America use the ChexSystems services and provide them with information on their customers who default on overdrafts and other payments.

When someone goes to a bank or credit union and fills in an application for a checking account, the bank will request at on the individual. If there is a report available, it usually means you have had an account closed for one reason or another in the past. The bank will then base a decision on whether to allow you to open an account or not. ChexSystems do not make this recommendation for the bank; they are rather more like the messenger who bears good or bad news. Banks have different policies on how they deal with ChexSystems. A ChexSystems report may contain:

  • Details on failure to settle debts
  • Unpaid overdraft fees
  • Depositing counterfeit bills or forged checks
  • Writing bouncing checks

Once your bank reports you to ChexSystems your name stays on their files for a period of up to 5 years. In this time it may prove very difficult indeed to open a new checking or savings account. Making sure you service your account and keep up to date with any overdraft payments is very important as it is not an easy exercise to have your name removed from the ChexSystems.

Did You Know?

This is a fact-by-fact list of what ChexSystems is, why they were created and what it means to you to be on ChexSystems.

  • ChexSystems is a credit reporting agency that is used by banks and other financial institutions to help measure the amount of risk that a new customer poses to their business.
  • If, for whatever reason, your name has been reported to ChexSystems as a risk you will have a difficult, if not impossible, time opening any type of banking account.
  • If you are reported to ChexSystems you will stay on their database a minimum of 5 years.
  • Practically every single one of the financial institutions in the United States use ChexSystems to check out potential customers before allowing them to have any type of account.
  • ChexSystems does not profit in any way by reporting your negative information. Negative or positive it doesn’t affect them either way.
  • ChexSystems cannot be used to open, close or otherwise perform any banking actions. They are simple a credit reporting agency like Equifax, Experian and TransUnion.
  • If you have filed BANKRUPTCY you will need copies of the discharge documents from the bankruptcy court.
  • If identity thef is the reason you are on ChexSystems you will need to give ChexSystems a certified copy of either your police report or an affidavit of fraud.

How Was ChexSystems Started and Why

Back in the late 70’s a retail grocery store owner who was fed up with getting bounced checks came up with the idea that we now know as ChexSystems. What he wanted to do was give businesses like his (not the banks actually) a way to share information about customers that had passes bad checks so that they couldn’t keep doing it at other retail locations. In effect, he wanted to stop people from being able to write bad checks and stem the losses he was having because of them. It was a good idea actually at the time and it grew rapidly.

For 30 years ChexSystems has been the one of the biggest providers of banking and other financial information to the United States banking industry about fraud and abuse. Today they are owned and managed by a company called EFunds Corporation, which is a publicly traded company. ChexSystems is just one of several companies that is owned by EFunds.

The average person doesn’t know about ChexSystems usually until they try to open a bank account and are denied. Unlike the Big 3 credit reporting agencies (Equifax, Experian and TransUnion) ChexSystems has nothing to do with your credit rating. It is simply a way for banks to check out new customers and make sure that they have a clean banking history before they approve a new bank account.

The principal activities that EFunds is involved with as a business entity are:

  • Transaction processing
  • Risk management
  • Professional services to financial institutions
  • Professional services to retail organization
  • Electronic fund transfer networks
  • Government agencies

EFunds has operations that they keep in 4 segments.

  • Electronic Payments, funds transfer and other payment processing services
  • ATM management services
  • Decision support and risk management (ChexSystems)
  • Professional services / business process management

EFunds, as stated earlier, owns ChexSystems but they also own Checks Unlimited, Designer Checks, Shared Check Authorization Services (SCAN), Debit Bureau and Deluxe Direct Marketing Services. If you have ever written a bank check, used a debit card from any financial institution, used a money wire transfer service or somehow moved money around within a financial institution then you have used one or more of the services that EFunds owns. In fact, they are integrated into the life of every single American in one way or another, and ChexSystems is just one of their many branches. If you’re keen on contacting them about something you can do so at www.efunds.com.

What is ChexSystems in Layman’s Terms

If you’ve ever had severe problems with a bank that caused them to cancel your account you have created a problem that doesn’t go away very quickly or easily. Once a bank closes your account forcefully the first thing that will happen is that they send all of your info to a credit reporting agency called ChexSystems. If this has already happened and you have tried to open another account with any other financial institution you probably found out that it wasn’t possible. In fact, if you didn’t know about ChexSystems you might have had quite the shock when you found out about them the hard way at your local bank.

Think of ChexSystems as the ‘bank police’. Basically it’s an association of banks and other financial institutions that work together with 1 goal in mind; keep people who are not financially responsible or possibly engaged in criminal activities out of their banks. What ChexSystems does, in the most basic terms, is keep a database of anyone who opens any type of monetary account anywhere in the United States that banks can use to check on new customers. If you open an account ChexSystems knows about you good or bad. When you have problems with any financial institution they get advised of it and keep it on record for 5 years (or sometimes longer).

Consequently, if you have an account closed at any financial institution because of poor financial management skills or because of suspected fraudulent activities your account (along with your name and all other info attached, natch) will be sent to ChexSystems to alert them. In turn they will alert all the other banks and lenders (and we do mean ALL) to let them know about you and the problems you created. What this means is that, once you land in their database, you’re going to have a very difficult if not impossible time trying to get a new account anywhere else for at least 5 years.

This can happen even if the problem wasn’t directly or intentionally caused by you. It can also happen if you’ve been the victim of identity thef or fraud. It can also happen (although not usually) if your bank makes a big mistake.

No matter how it happened you’re going to definitely want to clear up your account. Not being able to open a bank account might not seem like a really big problem but, in fact, it can severely hamper practically anything you do financially. For example, where will you cash your checks every week from your job? How will you pay bills like rent, energy, auto payments and your mortgage, to name a few? If your job requires that you have direct deposit for your checks, how will they do that if you don’t have an account? How about opening a new business? You’ll certainly need a checking account at least to do that.

Those problems are just for starters. If you don’t have a bank account you’ll need to use a check cashing service to do so and they charge for the service. If you need to pay bills with a check you’ll have to get money orders and there’s a charge for that. The time and energy spent just doing those few tasks could actually be substantial, and the gasoline wasted doing them also. You could use prepaid debit or credit cards but their fees can be substantial. No matter how you slice it not having a bank account is going to be a major pain in the tush.

Furthermore, your account history is all that the ChexSystems is interested in. There are several components to your account, which include the following:

Information Identification

It contains your personal details such as your name, address, cell number, your social security number as well as all the past numbers you have had along with any other alterations.

Due Balances

If at any time in your life, you have had an account closed on you simply because you could not pay your dues; this component gathers all that information. It also includes any overdrafts that you may have incurred which led to your other account getting involuntarily terminated.

Other Bank Accounts

If the client has ever had multiple accounts at a given point in time, the account history will include that. It is a piece of crucial information to have because it gives an idea of how quickly the client changed the account and whether or not there was any malice involved.

Unpaid Fees

Any outstanding bank transaction fee is recorded.

Why We Believe ChexSystems can be an Abuse of Your Rights

The fact of the matter is simply this; every single bank in the United States benefits from incredible protection that is provided to them by the Federal Government through serious and substantial regulation. We believe that with this protection comes the responsibility to serve the public, something that the banks can now legally avoid due to ChexSystems and other reporting agencies.

By letting this happen the Fed is failing to protect the rights of the citizens that it is sworn to protect. If a person has no way to exchange the money that they receive for their labor for goods and services that they require the entire process begins to break down. Without a bank account it is extremely difficult to do many tasks that are required in the United States and ChexSystems makes it extremely difficult for people who have made a mistake to get a bank account.

How to Get Your ChexSystems Report Generated?

There are laws in place such as the “Fair Credit Reporting Act” that lets you view your ChexSystems report once a year to see where you are in terms of a good impression. It is important that you view your report and see where you stand because only then you can try to improve your situation. Many clients do not have the knowledge of their checking account or, why even the banker rejected their account application. This is simply because they do not view their ChexSystems report as a whole. If you haven’t sent a request to the ChexSystems consumer panel, we recommend you do so and avail of this free benefit.

If you have faced rejection for a new checking account, you can ask the credit union or bank to give you an ‘adverse action’ notice. This notice gives you the contact information of the company that provides you the report and gives you information on why was the account request rejected. Which you can always understand by viewing your own report but hearing it from them means you can pinpoint the key decision factors and focus on them.

Ways You Can Clear Out Your ChexSystems Record

By what we understand above, ChexSystems acts as a kind of security system for bankers. It helps to ensure a defaulter or someone with bad financial practices does not get a chance to open more accounts than they should. However, if you somehow fall in that category and the bank is still giving you a suspicious eye, you can get out of it with a new bank account as a benefit in several ways.

See More: Make sure you know you are not on the ChexSystems

Understanding ways to clear out your Chexsystems record is only going to help make sure you get a new bank account as quickly as possible. Here are some of the ways you can do so.

Report All The Errors

Sometimes, the system can get one or two variables wrong that produces irregular results. If that happens, the best thing is for you to come up with the supporting documents and then submit them to the ChexSystems website. You can do this by visiting the Dispute Information Section and choose the documents that you wish to submit as proof. Once the documents receive approval, your ChexSystems report becomes eligible for revision and a new report can be made for ready reference.

There are several ways in which, you can submit the report as well and these include online submission, through an email or fax and even by phone. You can call their number at 800-513-7125 and the call assistant will guide you through the process of submitting error reports.

Pay Off All Your Debts

Much of the problem that stems in your financial reports is because of the money you owe to your lenders. Not only does this reflect badly on your financial history but it also hinders you from opening any new accounts due to the ChexSystems report. If this happens, go forward and pay off your debts as quickly as possible so the report can get a revision. Although you might get the report next year, the online update will allow bankers to view your most recent financial activities and decide whether to award you a new account or not.

If for any reason your budget is tight (which is most likely the case with many), you can always ask your lender to give you more time to pay off that debt or simply if they would settle for a lesser amount. Some lenders actually allow this seeing how well the person has managed any previous loans so we determine through this that your reputation in the financial world really matters.

Request Creditors to Remove Information

Whenever you submit the cash and pay off your debt, you can ask your lender to clear your dues immediately. They will then go forward and update your profile on ChexSystems hence relieving you of any financial burdens and opening new ways for you to do business. For example, you can finally open that new account that all this was for in the first place.

What you do is you get the payoff information in written form and then you simply keep a track of all the receipts regarding your payments. Once done, you can move on with the request.

Wait For Five Years

The last option that you have at your disposal is to wait for five years until the record drops off the ChexSystems itself. ChexSystems is reputed to keep your information for a total of 5 years and no more. All the data then revises and a new ChexSystems report develops with the most recent data available. This might be a good option for someone who does not have to rely on a new bank account but for someone who has no other choice but to open one this is not an option. Understand your situation properly before moving on with any of the options mentioned here.

Ways to Maintain a Positive ChexSystems Report

Now that you know about how to clear out your ChexSystems report, you should also know about how to maintain a good one. You do not always have to work so hard if you are able to maintain a positive review of your financial transactions in your ChexSystems report. There are several ways to do so and we have listed some of them below for you:

Closing an Account Immediately

Most of the time when you leave an account unused, you tend to ignore the fact that maintenance fees and overdraft fees can accumulate in that account. Even after you send in an account closing request, it can take up to two weeks to do so. In that period, you can still accumulate some amount that you would have to clear in order to fully close your accounts.

To maintain a positive ChexSystems report, we recommend that you close your account directly with the bank or credit union. This way, the balance would not fall into a negative number.

Protect your Account Debit Card

Debit cards are always at risk of getting lost and if that happens, you are vulnerable until the card is blocked. In that time period, anyone who steals the card can purchase items that dwindle your funds. The problem gets even bigger if the card in use is a credit card so we recommend that you not leave your PIN code with someone, even if they are someone in the family. Anyone can end up abusing your card if given a chance.

Review Your Bank Statements Regularly

This is generally good practice and keeps you updated about the different aspects of all your bank accounts. By checking your bank statements, not only can you personally identify any mistakes but also keep a track of all the transactions that have taken place through your account. If you do end up finding any unnecessary transactions or fees, make sure you report them to your bank and get them removed because it may end up reflecting poorly on your ChexSystems report.

Notify Bank When You Change Your Address

A lot of important documentation dispatches your way regarding your bank account. If you are moving from one house to another, make sure you change the address on your bank account information. Unless you want someone else to get your account information or that new credit card you ordered, you need to get it done as soon as possible.

Always Balance Your Checkbooks

There is a system called overdraft protection that lets you avoid spending more than you can afford and turning your bank balance into a negative number. You should always try to focus on balancing your checkbooks otherwise the negative balance can be carried forward into the ChexSystems report and you could be denied a new bank account. This, therefore, leads to you not being able to open a new account in another bank simply because the banker there knows you have not paid your dues in the previous one.

Conclusion

ChexSystems reports are an essential part of security for the banks to keep track of all the clients that come in. From a bank’s perspective, we see fewer defaulters joining the bank and therefore lenders benefit from giving out loans because they know their borrowers have a good history with their finances. This way a bank is able to protect its reputation as well as the quality of service that it provides to its customers.

From the customers’ perspective, ChexSystems may contain crucial information about their accounts that they themselves might never have thought about. Through the reports, you can keep a track of your own habits and therefore work on improving them.

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