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ChexSystems: What You Should Know!

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ChexSystems: The Basics



ChexSystems: The Basics

Are you having trouble opening a banking account? Do you keep getting denied and can’t understand why? This may be caused by a service, used by financial institutions, called ChexSystems. What is ChexSystems? And what does it have to do with you? I’m glad you asked.Approximately 80% of all banks and credit unions nationwide are members of, or use, ChexSystems. ChexSystems is a database of information, provided by financial institutions, containing reports on consumers with account mishandling issues in their past.
ChexSystems is used by banks when qualifying a new account. If a report is available, the bank may decide to deny the new account, depending on the policies of the bank. ChexSystems does not decide whether to approve or deny a new account, they only provide information to the bank. If a ChexSystems report is not available for you, this means you have no deposit account history, or you are in good standing with current or previous deposit accounts.

Getting Added to the ChexSystems

The most common way to get your name added to ChexSystems occurs when a bank or credit union closes your account, for reasons other than voluntary. Reasons for closure are normally due to a negative balance over an extended period, excessive overdrafts, outstanding balances to the financial institution, or fraudulent activity. Once an account is closed by the bank, the account holder’s name, along with a reason for the closure, is reported to ChexSystems unless the matter is settled in a timely matter.Other information gathered by ChexSystems helps financial institutions with detecting possible fraud. Names of account holders who have reported lost or stolen checks are added to ChexSystems to track the occurrence of claims. This protects against fraud from individuals who make false claims of lost or stolen checks. Additionally, ChexSystems tracks the number of times you have applied for a new account in the past 90 days. This information is used to check whether an abnormal number of new accounts were acquired within a short time, which indicates possible check cashing or kiting schemes.

Staying Off ChexSystems

staying off chexsystems

Being added to ChexSystems is not the end of the world, but can be a frustrating obstacle.The best way to stay off of ChexSystems is to never have a report submitted by managing your accounts responsibly. Unfortunately for some, hard times or simple mistakes can lead to the mishandling of an account. Just remember, mistakes can be made by anybody.
Once your name is added to ChexSystems it can stay there for up to five years. The problem with having your name on ChexSystems is that most banks will deny your application to open a new account. However, there are ways of getting your name removed from ChexSystems.
Occasionally, just like some account holders, banks make mistakes too. If you feel a report was submitted by error, or for reasons other than your own, you can dispute the report with either ChexSystems or the bank that submitted the report.
If your report indicates a debt owed to a bank, the bank may remove the report if the debt is paid back. Paying back debts to the bank does not guarantee the report will be removed because banks are not obligated to remove accurate reports due to monies owed to the institution. However, banks are required to mark accounts as paid if a collection amount is paid back.

Alternative Banking

If you find yourself on ChexSystems for reasons of personal mistake, there are other ways of getting back into the banking system.Although the majority of banks and credit unions use ChexSystems when qualifying new account applications, there are some banks that don’t use ChexSystems as part of their application process. These banks are referred to as non-ChexSystems banks. Non-ChexSystems banks offer similar services of ChexSystems banks; however, they can be difficult to find.
For the people who can’t locate a non-ChexSystems bank in their area, can’t open an account for reasons other than ChexSystems, or are seeking an alternative to traditional banking, second chance banking provides a way for consumers to remain in the banking system. Second chance banking accounts don’t use ChexSystems when qualifying new accounts and are much easier to locate than non-ChexSystems banks.
Hopefully you have a better understanding of ChexSystems and how it works. If you know, or feel, you may be on ChexSystems and would like to examine a free copy of your report, click here. Under the Fair and Accurate Credit Transaction Act (FACTA) amendments to the Fair Credit Reporting Act (FCRA), you are entitled to a free copy of your report once every 12 months.


Common Questions about ChexSystems

common questions about chexsystems

Who is ChexSystems, Inc.?

ChexSystems, Inc. is a deposit account verification service used by financial institutions such as banks and credit unions. Deposit account verification is simply a tool, used within the banking industry, to aid in the application process of new accounts. The purpose of using ChexSystems is to identify any account mishandlings by potential applicants.

What is account mishandling?

Account mishandlings are causes for your bank to close your deposit account. This may include: excessive overdrafts over a short period, fraud, debts owed to a financial institution, or false information given on an application. Each bank has its own policies defining account mishandling and causes justifying closure of an account.

What is on a ChexSystems report?

ChexSystems reports contain a variety of information used for determining qualification of a deposit account. This includes:
  • If the applicant has an account closure on file
  • Whether outstanding debts have been paid
  • Validation of applicant’s social security information
  • Validation and verification of applicant’s drivers license information
  • Banks owed money by applicant (usually due to overdraft fees, ATM transactions, or automatic payments that were honored on insufficient funds)
  • Multiple overdrafts within a short period of time
  • Savings account, debit card or ATM abuse
  • If the applicant has checks outstanding on the SCAN database (SCAN is a service used by retailers that keeps track of bank accounts and identification numbers from checks that have bounced)
  • How many accounts the consumer has applied for in the past 90 days
  • History of checks ordered in the past 3 years

Do ChexSystems reports contain any positive information?

No. ChexSystems reports only contain negative information unlike other Consumer Reporting Agencies (CRA) who often report positive and negative activity in a consumer’s history.

What if ChexSystems does not have a report on me?

If you are not indicated on ChexSystems, you either have no deposit account history or you are in good standings with current or previously used financial institutions.

How do I get a copy of my ChexSystems report?

ChexSystems reports can be ordered by mail, phone or fax. If you have been denied an account in the last 60 days, it is possible to obtain a report online.

How much does a copy of my ChexSystems report cost?

Under the Fair and Accurate Credit Transaction Act (FACTA) amendments added to the Fair Credit Reporting Act (FCRA), you are entitled to a free copy of your report once every 12 months.

How fast are ChexSystems reports delivered?

Banks can access ChexSystems reports instantaneously by internet or phone. Consumer initiated reports are mailed within 5 business days.

Do reports stay on ChexSystems forever?

No. Each report submitted to ChexSystems is kept on file for 5 years.

How do I get a report removed from ChexSystems?

Reports can be removed by the bank or credit union who submitted it to ChexSystems.If there was an error by the bank, which led to a report being submitted, you can have the report removed if the error is proven to the bank. Banks can also remove a report if an outstanding debt is paid; however, banks are not obligated to remove accurate reports of account mishandling due to debts owed to the institution. Banks are required to mark the account as paid, if a collection amount is paid back.

Can I dispute a report with ChexSystems?

Yes. Disputes regarding a report can also be filed with ChexSystems. When a dispute is received by ChexSystems, they must respond back to you within 30-45 days, depending on how you obtained the report.After receiving your dispute, ChexSystems must verify your claim with the financial institution that submitted the report. If the disputed information can not be verified by ChexSystems, the information must be deleted from your report.

Can I add information to my ChexSystems file?

Yes. You may add a brief statement to your ChexSystems file. To add a statement to your file, the statement must be written and signed with a clear indication that you would like it added to your ChexSystems file.

How do I get in contact with ChexSystems?

ChexSystems, Inc.
7805 Hudson Road, Suite 100
Woodbury, MN 55125
Phone: 800-428-9623
Fax: 602-659-2197

Step-By-Step Guide to Disputing a ChexSystems Report

dispute chexsystems report

ChexSystems, like credit bureaus, is considered a Consumer Reporting Agency (CRA) and governed by the Fair Credit Reporting Act (FCRA), which entitles consumers the right to repair their own credit report. A study by the U.S. Public Interest Research Group (USPIRG) found that one in four credit reports contain errors.
The Fair and Accurate Credit Transaction Act of 2003 (FACTA) added new sections to the FRCA, which placed new emphasis on the accuracy of information in consumer reports. Previous to the FACTA, disputes regarding the accuracy of information in a consumer report restricted the consumer to deal only with the CRA.Under new FACTA provisions, a consumer may dispute inaccurate information directly with the information provider (person, company, or organization responsible for submitting consumer information to a CRA).
Under the FACTA amendments to the FRCA, nationwide CRAs are required to provide consumers a free copy of their credit report, upon request, once every 12 months. This includes ChexSystems.

Disputing ChexSystems

Under the FRCA, both the CRA and the information provider (such as the institution responsible for submitting a ChexSystems report) are responsible for correcting inaccurate or incomplete information documented in a consumer’s report. Below are steps for disputing a ChexSystems report.

Step 1

Review a copy of your report. Check it thoroughly for any information which may be inaccurate. If inaccurate information is found, you will need to generate documentation that can substantiate your claim.

Step 2

Inform ChexSystems, in writing, of what information you feel is inaccurate. Include copies of the documentations verifying the credibility of your claim. In addition to your name and address, your letter should clearly, and in detail, itemize each inaccuracy, explaining why you are disputing the information and requesting that it be removed or corrected. You may want to include a copy of your report with the items in question circled or highlighted. ChexSystems contact information and a sample dispute letter are included at the bottom of this article.

Step 3

Send your letter by certified mail, along with a return recipient request. This is important for documenting what ChexSystems received. Copies of your dispute letter and enclosures should also be kept for documentation purposes.
Another way of disputing inaccurate information on your report is to dispute the matter directly with the financial institution that originally provided the information to ChexSystems. The previous steps can be used to mail a dispute to the information provider. Disputes can also be handled by phone, fax, or in person. Which ever way you choose to hand the dispute, be prepared to furnish a detailed explanation as well as any documentation verifying your claim.

ChexSystems Responsibilities

When a dispute is received by ChexSystems, they are required to investigate the items in question within 30-45 days, depending on how you obtained a copy of your report. The only reasons ChexSystems will not investigate a claim is if they consider the dispute to be frivolous. All relevant data provided by you must be forwarded to the financial institution that provided the information. Once the information provider receives notice of a dispute from ChexSystems, it must investigate, review the provided information, and report the results back to ChexSystems. If the disputed information is found to be inaccurate, the information provider must notify ChexSystems of its finding, so they can carry out the consumers request to remove or correct the reported information.
Investigated information can only be added back to your report if the information provider verifies that it is accurate and complete. If ChexSystems claims the information was verified as being inaccurate, and nothing was deleted, then you can send a Procedural Request letter. When the investigation is complete, ChexSystems must provide you with the results, in writing, and a free copy of your report if the dispute results in a change. They must also send you written notice that includes the name, address, and phone number of the information provider.
In the event that ChexSystems does not respond to you within the 30-45 days of receiving your dispute, you can take action by sending a Demand for Removal letter to ChexSystems. No response indicates that confirmation of the information may not have been conducted; therefore, the information must be removed from your report.
If an investigation does not resolve your dispute with ChexSystems, a brief written statement can be added to your report explaining your dispute.

ChexSystems Contact Information

ChexSystems, Inc.
Attn: Consumer Relations
7805 Hudson Road, Suite 100
Woodbury, MN 55125
Phone: 800-428-9623
Fax: 602-659-2197

ChexSystems Sample Dispute Letter

Your Name
Your Address, City, State, Zip Code
Complaint Department
Name of Company
City, State, Zip Code
Dear Sir or Madam:
I am writing to dispute the following information in my file. I have circled the items I dispute on the attached copy of the report I received.This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be removed (or request another specific change) to correct the information.
Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please re-investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.
Your name
Enclosures: (List what you are enclosing.)



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