What is ChexSystems?

What is ChexSystems?

We've had a number of clients that have been unable to open a checking account because of ChexSystems. I've decided to check it out for myself and it seems to be valuable information that can help you becaome "bank friendly".

How it works:
U.S. banks and credit unions report incidents to ChexSystems to protect themselves and other banks in the future. You get reported to ChexSystems if your account is closed for "cause." What is "for cause?" Banks differ greatly between them as to what valid reasons are for closing an account. Here are some examples:

  • The bank was unable to collect for an overdraft, ATM transaction, or automatic payment which they honored on insufficient funds.(Regardless of amount, and often without waiting more than a few days!)
  • Multiple overdrafts.
  • Savings account, debit card or ATM abuse.
  • Fraud.
  • Providing false information in opening account.

 

Each incident stays on your record with ChexSystems for FIVE full years from the date the incident was reported. You are entitled to see your Chexsystems Report once a year for FREE, just like you are entitled to a free credit report from Experian, Equifax and Transunion.

Getting an incident reported to ChexSystems is the Kiss Of Death for your financial future. Most banks now say: "Our bank policy is that we will not open a checking account for you if you have one or more incidents reported to ChexSystems." Scary.

Do Banks Open Accounts & Close Them Later?

Unfortunately yes, according to this site.

"It seems more common amoung some banks than others. Some banks have online applications that will approve immediately. Then the bank will wait until the signature card is sent in to actually look at the Chexsystems report. At that point, they will send back the initial deposit and close the account.

"Then there are other banks that do "sweeps" on accounts. This is where a bank, generally the loss prevention department will do a random check on accounts with chexsystems. If they find that the customer has a chexsystems record, they then will determine that they person may be a risk and they will freeze account, and later close it.

For more details about this system and what to do if you get reported, check out these excellent resources: