Checking Accounts and ChexSystems

March 10, 2006 – If you have never heard of ChexSystems, you are not alone. But if you have a checking account, it’s history is tracked in much the same way that credit reports track various lines of credit you may have. ChexSystems is the company that does this tracking, and the items that appear on your ChexSystems report should be just as important to you as your credit report. If the report is bad, you may be forced to close your checking account, and not be able to get a new account at any bank.

ChexSystems is most concerned with bouncing checks. If you don’t have the funds in your account but you write a check anyway, you’ll wind up with a negative mark on your ChexSystems report. That blemish will remain on your report for five years.

If you get enough bad marks, then your bank will force you to close your checking account. Furthermore, you will find it very difficult to open a checking account at most other banks too. That’s because most banks look at your ChexSystems report before they will allow you to open a new checking account.

Not having the ability to open a checking account can be a real hassle. It means that you will have to pay your bills by money order, which is inconvenient and expensive. Roughly 30% of all consumers find themselves in this position for any one of a variety of reasons.

For those who have been barred from opening a checking account due to bouncing checks, there may be some things that you can do to help yourself.

A number of major banks allow consumers to take classes on the responsible use of checking accounts and overall financial responsibility. Those that complete these education programs and pass a test will then be allowed to open new checking accounts.

These re-education programs are really only for people who made an honest mistake. They didn’t keep their check register up to date, or balance their account properly at the end of a month. If you are suspected of being involved in fraud, a note to that effect will appear on your ChexSystems report and you will be barred from taking any classes.

Classes are not available in every state. Some states simply don’t allow them. You should check with your bank to find out if there are classes in your area.

For those who don’t want to take classes, Gold Coast Federal Credit Union in Palm Beach, Florida offers what they call a "Fresh Start" program for those who have had problems with bounced checks. In order to get a checking account through them, you have to pay a $10 monthly fee, plus have direct deposit for your pay checks. If you manage to go through a year without bouncing a check, they will convert your account to a free checking account. If not, they won’t cancel you account but you will be hit with hefty fees for bouncing a check, and the count down clock for free checking will start all over again.

If neither of these options are viable, then there is one more resource that you can try; a website named ChexSystems Bites. This website is build more like a personal home page than a professional site, but don’t let that fool you. It is packed with information on ChexSystems. The link above will take you to a page that allows you to look up banks that don’t use ChexSystems in the checking account setup process.

The site contains contact information for ChexSystems and has a very interesting "Hall of Shame" area.

Consumers should also be aware of their rights with regard to their ChexSystems report.

By law, if you are turned down for a checking account due to information that appears on your ChexSystems report, you can request a free copy of your ChexSystems report within 60 days of such action. While not considered to be a credit bureau, ChexSystems is a consumer reporting agency that is covered by the terms of the Fair Credit Reporting Act (FCRA) and the more recent Fair and Accurate Credit Transactions Act (FACTA). This means that you have the same dispute resolution rights with ChexSystems that you would have with the big three credit reporting agencies. It also means that you are entitled to view your ChexSystems report for free once every year.

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