Chexsystems is one of the three pioneers of the “Check Systems” in the U.S. Chexsystems is a network of financial institutions that work together to screen unwanted customers, including individuals and businesses with bad banking history, bad credit score, and bad checking account management. The financial institutions report fraudulent activities on their end to the network so that other banks may know which customers they should be wary of.
The noble aim is to provide checking accounts and do business only with financially responsible individuals. The member institutions are often extremely reliant on the system to provide them with information about customer banking history and would-be customers.
Those who get listed on Chexsystems are often banned from opening checking accounts in all the banks that are members. Customers who demonstrate poor financial management skills, such as those who overdraft their bank accounts every so often, and those who have engaged in fraud in the past.
Getting reported to Chexsystems may result in long-term consequences. Your name will be on there for five years, and during such time, you will not be able to open a checking account with any of the member banks. Other financial institution partnered with Chexsystems are lenient, but for the most part, simply looking at the Chexsystems list is enough for a lot of banks.
Because rejection depends on whether or not you’re on Chexsystems, potential customers are at an extreme disadvantage. Here are some activities that may get you listed on Chexsystems.
1. If you fail to reimburse overdraft amounts
2. If you misuse your savings account, ATM or debit account
3. If you entered the wrong information when you opened your account
There are many more factors that can result in account closure, but chances are you won’t be able to find out what these are until it’s too late. Banks will not always tell you the reasons for account closure directly. You will need to investigate your account yourself, pay what you owe and ask the bank to verify that you have done all you can to keep your good standing with them.
It’s a good thing that there are some ways to get yourself off the Chexsystems list. First of all, you need to get a copy of your consumer report. If you have been blocked from opening an account at a financial institution because of your Chexsystems listing, you can file a dispute. Just make sure that you have all the documents you need on hand to prove that you’re not in trouble with your bank.