What You Should Know About Chexsystems

If you've recently opened a checking account and you haven't had any trouble, you probably haven't heard of Chexsystems yet. However, if you should try to open a bank account at some point and your bank won't let you, it might be because of Chexsystems.

The parent company of Chexsystems is eFunds - created in 1999 to serve the financial lending services sector. Its specific mission is to detect fraudulent activity and help financial institutions in their risk management analysis, particularly for their individual customers.

While your credit score represents your history in paying bills and the way you manage credit, Chexsystems monitors and reports on your banking activities. It looks for unusual or suspicious banking transactions, overdrafts, cashing checks against insufficient funds and not meeting minimum account balances.

In this way, Chexsystems provides two services. It verifies your checking activity and functions as a consumer credit reporting agency similar to TransUnion or Equifax. Just as you can ask for one credit report every year, you can also ask for a Chexsystems report once a year, also free of charge. This is because, like the credit reporting agencies, it is also covered by the Fair Credit Reporting Act.

This means that consumers can question any information contained in the report, dispute entries in it and can request evidence for reported activity. Majority of banks and credit unions in the US use Chexsystems and if there is anything negative regarding a prospective applicant, that applicant could have difficulties opening a checking account. Chexsystems: is it fair? Critics have voiced their objections about Chexsystems' reporting practices claiming that the system is characterized by unfair reporting. Unlike credit bureaus that issue reports containing both positive and negative information, critics insist that Chexsystems only reports on the negative, hence jeopardising the credit reputation of individuals who are otherwise qualified to open checking accounts.

Given the mounting criticism, several banks met in 2000 and they agreed that they would re-consider their policy in approving checking account applications based on Chexsystems reports. Reforms were introduced, some of which include ignoring entries that are more than three years old as long as they are not related to fraudulent activity, disregarding Chexsystems entries that are one year old provided the consumer has settled the debt, and extending the time in which a consumer can repay the debt.

What information is provided in the Chexsystems report? A sample report shows us that it is indeed very thorough. The name and address of the person in question appear at the top of the report, along with an ID number and Social Security number. If you should ever write Chexsystems about a report, he you should refer to your social security number and ID number in your correspondence.

If you believe any information in the report is inaccurate, the report states that Chexsystems will investigate any discrepancies you point out. You can also send your inquiry to fax number 602-659-2197.

The next box is "reported information." This reported information originates from mostly financial institutions and is kept by Chexsystems for a period of five years. If there is more than one reported information or transaction, these are individually itemized. It lists the source of the reported information, the individual being reported on (including his social security number and driver's licence), and the type of report (e.g. non-sufficient funds).

The next box reads, "Inquiries Initiated by Consumer Action." This covers transactions that you made yourself. It shows what applications you have had for a credit card, or applications you made from a financial institution or bank. This information stays on the report for up to three years.

The third section of the report is on "Inquiries not Initiated by Consumer Action." This means that other people have asked about you. These people could be your current loan holders or credit card companies, pre-approval creditors, or anyone else trying to assess your credit.

The next box says, "Retail Information," and this includes checks you have written to stores and other retailers that have been returned for nonsufficient funds. When a store gets a check that it can't cash because of nonsufficient funds, a company called "Shared Check Authorization Network" receives it and keeps a database of your fraudulent activity and checks that have been returned. In order to participate, including obtaining information for check authorization and verification, retailers must be SCAN members. Chexsystems uses SCAN, but it does not get involved in collecting returned checks.

If you've ordered any checks, your Chexsystems report also provides this information. It also details the history of your check orders. The next two boxes after this are validation activities for your driver's license and your Social Security number. Your driver's license is processed both with validation and then verification. Chexsystems validates your driver's license by matching your license format with your state's approved format. It also verifies your name and place of birth.

It may do you well to think of Chexsystems before you write out your next check. You should be sure there's enough money in the bank to cover your check and that the money is truly yours and not someone else's. Of course, you can always pay for merchandise with a credit card or with cash.

External Links

Creditinfocenter.com

Consumerdebit.com

Ckfraud.org