The ChexSystems nationwide database is owned by a company called eFunds. They offer multiple services that assist banks and merchants to help stop fraud, identity theft, and bank and merchant losses. Some banks are able to enter information into the computer and view reports online. Others still have to utilize the phone system and get a verbal report. Either way, the information is the same. Reports for business names are typically checked as well.
When you open a new account at a bank, the ChexSystems report not only shows if you have negative activity at other banks, but also if your social security number and date of birth are correct, and the provided driver’s license number was in fact issued to you. This prevents someone stealing your identity and opening accounts in your name. Also, there is a section that shows any inquiries to your name or social security number for the past few years. This also helps banks see a pattern in behavior or identity theft. (This is usually not a concern if the behavior appears reasonable).
The negative activity banks report must be physically sent by the bank to eFunds. The bank is able to electronically send any information on delinquent and abused accounts typically after 90 days or so, but it is a manual process. Most banks have a loss prevention department that have to submit each account in and place it in the database for ChexSystems. The ChexSystems and eFunds company cannot search for delinquent bank accounts to report. Typically, a bank manager has done all they can to try to contact you to correct your account. Your name can be reported even if you were merely a second signer on an account.
You can be reported for activity such as: NSF (non-sufficient funds) activity-paid or unpaid, account abuse, unpaid overdrafts (usually debit card related), account charged off-unpaid amounts. Being reported to ChexSystems is not the same as being reported delinquent on a credit report, UNLESS, your account has been charged off and the amount you owe is sent to a collection agency.
There is a section on the report for negative merchant activity. This is different from bank activity. If you write a check to a store that participates in the eFunds program, they scan the check at the register. If the check comes back due to non-sufficient funds to any eFunds participating merchant, it is reported to ChexSystems. If you consistently write NSF checks to participating merchants, you may end up having trouble writing a check to another participating merchant, even if there is plenty of money in your checking account.
Once you’ve found out you have negative ChexSystems information, there is a form the bank should have. They are not allowed to give the actual ChexSystems report. The form will ask you to fill in some information and either call or fax in a request. Usually, the bank will tell you which banks reported and when. You may be able to go back to that bank and discuss the matter. If it was a genuine bank error, they should correct the matter and have the negative information removed from ChexSystems and give you a letter from the bank.
The majority of banks will not open accounts for people with negative ChexSystems information. There are banks that do offer programs that are a “last chance” account, but are heavily restricted and monitored. In some areas, there are banks that are working with the local Consumer Credit Counseling Agencies, who are offering classes that teach how to manage a bank accounts. After completing a class, they issue a certificate and place a comment on your ChexSystems report that you have successfully completed the course. There are only a few banks that participate, so make some phone calls before going in. There is typically a fee for the course, but it helps avoid paying the high check cashing fees from banks.
Sometimes banks will give someone the opportunity to have a second chance. Because you have not established yourself at a new bank, you sometimes have to be willing to take what they offer. Unfortunately, bankers are trained to be suspicious of everyone, and rightfully so in this day and age. If they offer an old fashioned passbook savings account with no access unless the bank is physically open, you should be grateful and open the account. There may be the stipulation that if the account can be managed for 6-9-12 months then you could open a checking account with just a few restrictions. Make sure that you follow the bank rules and regulations and keep track of your balance; typically at the first sign of account problems, the bank will close your account.
