Ask the average American who or what ”ChexSystems” is, and you’ll get a blank stare. The unlucky people who do know about ChexSystems are usually painfully aware of how severely it can affect their lives. If you are on ChexSystems’ list, you have probably experienced the pain and frustration of not being able to open a new bank account, write checks, or use an ATM card (the core banking conveniences that everyone seems to take for granted). Unfortunately, millions of Americans are on (or have been on) the list, and are unable to enjoy these banking conveniences.
If you are on the list, it is important for you to know what ChexSystems is (and what they are not). ChexSystems is not a bank or a financial institution. Instead, they are a large consumer reporting agency (CRA) that maintains a nationwide database of banking customers who have been reported for writing bad checks, defrauding banks, having unpaid bank debts, or having too many “non-sufficient funds” (NSF) items. ChexSystems is owned by a large publicly traded company, eFunds, Inc. ChexSystems tries to (and has succeeded!) keep a low public profile. They don’t have a company Web site, and it is relatively difficult to find information about them.
Like the other large CRA’s (such as Experian and TransUnion), ChexSystems tries to distance itself from the problems it causes, claiming that it is simply a provider of information, and that it is the banks who use ChexSystems’ data who are the bad guys for turning customers down for new bank accounts. ChexSystems’ marketing materials claim that the company has no responsibility for the decisions banks make, stating that “ChexSystems neither approves nor declines accounts for banks and credit unions. The decision is entirely up to them.”
This is a convenient position to take. However, the fact is that ChexSystems (like the other CRAs) is not perfect. They make mistakes and errors can find their way into consumer’s records. The problem is that an error in a ChexSystem record has a severe and dramatic impact on a consumer. Even a simple error in a consumer’s banking history can prevent that customer from opening a new bank account (or could even result in the customer having their current banking relationship terminated!). That is a LOT of power for a CRA to have.
Other consumer’s find out that their banking record has been ruined as a result of identity theft. For example, a common scheme for some identity thieves is to open a bank account under someone else’s name, using a stolen social security number, and then take out a payday loan or two using the assumed identity. The funds are then withdrawn from the account, and the account is abandoned, eventually resulting in an account closure or NSFs. Unfortunately, the person whose identity was stolen now ends up on ChexSystem’s list. Unless you take steps to clear this situation up, you will be stuck on ChexSystems’ list (even worse, you’ll be stuck there for five years or more!).
As a consumer, if you have been informed that you have a bad mark in your ChexSystems’ file, you need to act quickly to try to resolve it. Unfortunately, ChexSystems doesn’t make it easy for you to clear up a bad mark (even if it is clearly in error).
Lots of people have never heard of ChexSystems until they have some banking problems. Then, you may be told the bad news that your bank account is being closed because you are on a list maintained by a company called “ChexSystems”. Then you need to find out: What is ChexSystems?
