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ChexSystems: Who They Are and How it Affects You
ChexSystems is a company that maintains a subscriber
membership service used in the banking industry. The members
consist mainly of Banks, and Credit Unions, but can include other
types of Financial Institutions.
It provides its members with what it calls deposit account
verification services. The members use the information that
ChexSystems provides to identify applicants that have had what
they classify as a suspect banking history.
ChexSystems maintains a central database containing all of the
information that has been reported to them. This information is
shared among the network of member banks and credit unions to
assess the level of risk in opening new accounts.
When someone applies to open a new checking account at a
ChexSystems member bank, a ChexSystems inquiry is made. If the
inquiry is returned stating that the person has had previous
problems with another bank, that individual will often be denied
from opening the account based on that ChexSystems report.
For this reason ChexSystems is considered as a Consumer
Reporting Agency. This makes ChexSystems subject to the same laws
as the Credit Bureaus that we are all familiar with: Experian,
Equifax, and Trans Union.
And like the Credit Bureaus? ChexSystems does not approve nor
decline new accounts. It only maintains, and reports, the
information in their database which bank members have submitted
to them. It is the individual bank who, based on the ChexSystems
report, decides whether or not to approve the new account.
Understandably? the majority of people in America who have the
very common checking account, and never had a problem, have never
heard of ChexSystems.
But for the nearly 8 million people that ChexSystems has on
file it is a very real problem. Many people feel ChexSystems has
very quietly become the big brother of the banking industry.
ChexSystems is a very necessary service for banks. On average
financial institutions are hit with over $1 billion in check
fraud losses a year. And they spend more than $200 million to
prevent, detect, and prosecute check fraud.
The criticism has been that there are no established
guidelines for exactly who gets reported to ChexSystems. It is
entirely up to the individual member banks.
There are no procedures to distinguish between the person who
may have had one or two unintentional incidents of bank
overdrafts? and the individual who truly committed a serious act
of fraud like passing numerous checks on a closed account.
Depending on a particular bank's internal policies, a person
could have their account closed and reported to ChexSystems for
as little as one bounced check.
Once in ChexSystems they are treated all the same, and the
record can remain for 5 years.
Bank executives defend the ChexSystems database as a valuable
weapon in the battle against fraud and high-risk customers. To
help prevent fraud and account abuse, banks and other financial
institutions rely on the information from ChexSystems. They say
it helps to keep banking services affordable and widely available
to the general public.
ChexSystems is also licensed as a debt collection agency. They
have a separate department that assist participating members to
collect on outsanding accounts. This also makes them subject to
the Fair Debt Collection Practices Act (FDCPA)
While ChexSystems is the most widely used database by the
banking industry, other similar systems exist, such as TeleCheck,
and National Check Protection & Data Verification
Services.
If you have recently been denied from opening a checking
account due to a negative ChexSystems report, you are entitled to
a free copy of that report.
To contact ChexSystems by mail:
ChexSystems, Inc. Attn: Consumer Relations 7805 Hudson Road,
Suite 100 Woodbury, MN 55125
Phone: 800-428-9623 or fax at 602-659-2197
Greg Ford is the owner and webmaster of http://www.chexsystemssolutions.com
Additional information regarding options for people in
ChexSystems can be found there.
MORE RESOURCES:
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