If you have been turned down for a bank account, you might have been blacklisted by ChexSystems. ChexSystems provides information to banks and credit unions about checking or savings accounts that have been closed because of mishandling. The reasons vary but can include unpaid overdraft or nonsufficient-funds fees, account fraud, and identity theft.
Banks screen applicants for new accounts and might deny anyone who has a bad banking history. ChexSystems is very similar to the familiar credit reporting bureaus, but they just have a different report and dispute process.
How ChexSystems 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 an overdraft, ATM transaction, or automatic payment which they honored on insufficient funds. (Regardless of the amount, and often without waiting more than a few days!)
- Multiple overdrafts.
- Savings account, debit card, or ATM abuse.
- Fraud.
- Providing false information when opening an 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.”
Do Banks Open Accounts & Close Them Later?
It seems more common among 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 the person may be a risk and they will freeze the account, and later close it.
For more details about this system and what to do if you get reported, check out these excellent resources:
- On our website:Â Sample letter requesting ChexSystems to validate and remove a listing from their database.
- ChexSystems, Inc.
7805 Hudson Road, Suite 100
Woodbury, MN 55125
Fax: (602) 659-2197
Non-ChexSystems Banks
Want to find a non-ChexSystems bank? Here’s our list.
To Order by Mail: Print the order form from the www.chexsystems.com website and mail to:
Deposit Payment Protection Services, Inc.
Attn: Consumer Referral Services
7805 Hudson Road, Suite 100
Woodbury, MN 55125
To Order by FAX:Â Fax the order form to 800-358-4506
