Understanding Chex Systems

Many people never hear about Chex Systems until a rather inconvenient time. They go to apply for a new checking account and are told that they will not be able to do so because they have a file on Chex Systems. Chex Systems is a comprehensive network of information utilized by 80% of banks and credit unions, so understanding how you might be affected by it is important to your financial success.

To put it bluntly, if you have a listing on Chex Systems, that is not a good thing. Operated both by and for the financial institutions that are members, Chex Systems attempts to provide information to help them decide whether or not it is a risk to allow you to open an account. If your checking or savings account has been closed due to “mishandling" at some bank or credit union, then that cause will be reported to Chex Systems.

Financial institutions differ on exactly what constitutes a reason for reporting someone to Chex Systems. In general, you might be listed on Chex Systems if:

• Your bank or credit union has not been able to collect on fees that you owe, even if the amount is small and/or if it has only been a short period of time.

• You have overdrawn on your account(s) several times.

• There is suspected fraud.

• There is suspected abuse of your debit card, ATM card, or other financial tool.

• You falsified information when applying for an account.

Whatever the reason, if you have been reported to Chex Systems then you will find it extremely difficult to open a new checking or savings account at the vast majority of financial institutions. Your bank or credit union is not obligated to tell you if your name has been reported to Chex Systems, hence the all-too-common surprise that comes when one goes to open an account. Of course, there are ways to find out beforehand.

Chex Systems really is quite similar to the credit bureaus, and actually is considered to be a consumer reporting agency under the authority of the Federal Credit Reporting Act. Just as you can obtain copies of your credit report, you also may obtain a copy of your Chex Systems report to know your exact listing.

Negative listings can remain on Chex Systems for five full years. The only way that a negative listing on Chex Systems can be removed is if the bank or credit union that reported you in the first place requests its removal. If you feel that your listing is an error, then you should file a dispute with Chex Systems.


Disputing Negative Listings

Make your dispute in writing, and send it to:

Chex Systems, Inc.
7805 Hudson Road, Suite 100
Woodbury, MN 55125

Or, fax it to 602-659-2197.

Chex Systems will investigate your claims with your bank or credit union, and inform you of the results within 30 days. If your listing is incorrect, then it must be removed or updated immediately by law. If Chex Systems disagrees with your dispute, then you may request that a personal statement of the dispute by added to your file.

It is important to recognize that Chex Systems does not have to remove the negative listing on your file just because you have since reconciled the situation with your bank. For example, if you were reported to Chex Systems because you had unpaid fees, then paying them does not mean that your file will disappear. (It does have to be updated as “paid”, however.)

Dealing with Accurate Negative Listings

If you want to open up a new bank account but you are on Chex Systems, it certainly will be more difficult than it would be otherwise -- but it is not impossible. Roughly 20% of financial institutions are not Chex Systems members, so certainly seeking out one of these banks or credit unions might be your best bet.

In addition, some institutions that do use Chex Systems might be more lenient than others about letting you open an account. Some may let you sign up for an account with another person, while others might even give you full privileges if your transgression had nothing to do with fraud, or if it is several years in the past.

You also may be able to take part in a program at a credit counseling agency or at a university to prove your competence at handling bank accounts. Such programs generally are sponsored by banks that will allow you to open up accounts at their institutions once you complete the course and pass a test.

Tips to stay out of Chex Systems

Of course, it is best to keep your name out of Chex Systems in the first place, if possible. Some tips are obvious, some not so much, but all must be adhered to diligently in order to keep your banking opportunities open:

• Pay all of your fees, no matter how small and insignificant they seem.

• Make sure that you always have enough money in your account to cover any and all checks that you write. Do not rely on the “floating” period between when you write a check and when someone will cash it.

• Do not close an account until you are positive that all checks attached to it have been cashed, and that you do not have an active automatic debit on the account.

• Check your bank statement every month to make sure that it is consistent with your records.

• Make sure that you and your banker understand one another. Confirm with him or her all fees for which you may be held responsible on your accounts, as well as how long it takes for deposited funds to become available to you.