Most people become aware of ChexSystems after being denied the opportunity to open a bank account. Others may find out they have been blacklisted by ChexSystems when trying to pay for a purchase at a retailer. Either way, it’s pretty much the worst time to discover you’ve been unfavorably tagged by ChexSystems.
What is ChexSystems?
As detailed in our post, What is ChexSystems? Everything You Need To Know, ChexSystems is a Consumer Reporting Agency (CRA) and approximately 85% of banks and credit unions utilize the service as the primary source to screen applicants who want to open a new checking and/or savings account.
ChexSystems has records on almost every checking and savings account holder in the United States. And because of that, they wield a lot of power and influence in the financial world. But Congress has put some rules in place which allow consumers the opportunity to dispute the information on their ChexSystems report. Because if we consumers did not have the ability to dispute this information, ANYONE or ANY BANK could place inaccurate information about our banking history into ChexSystems.
So, while ChexSystems isn’t a government agency, they — like the large credit bureaus — are governed by consumer protection laws. And knowing those rules and holding these CRAs accountable is the best way to remove negative information on your ChexSystems file.
Disputing your “ChexSystems Disclosure Report” (that’s what ChexSystems calls it) can seem like a daunting task. Luckily, the process is pretty straightforward. As long as you follow the correct steps outlined here, ChexSystems must respond to your dispute in a timely manner (set forth by federal law) to resolve the problem. And they must respond in a very EXACTING way. This is where knowing the rules and the procedures will be a great advantage to you.
Obtain A Copy Of Your ChexSystems Report
First things first. You need to get a copy of your ChexSystems report. Under the federal Fair Credit Reporting Act (FCRA), you are entitled to a free copy of your ChexSystems report once every 12 months or if you’ve been denied a new bank account in the past 60 days.
We strongly recommend you order your free report through the mail or by fax. Why? If you obtain your FACTA Free Annual Report online, ChexSystems has 45 days to respond to your dispute. Ordering your report through the mail or by fax reduces that period to 30 days. The reason that is so important will be detailed below as we review the dispute process.
ChexSystems provides a PDF form you can fill out for the report. Again, don’t request your report by going through the online request system!
Review Your ChexSystems Report
Like most reports you see for the first time, your ChexSystems Report can seem confusing. But it’s laid out and organized surprisingly well. The report is comprised of eleven (11) major sections. Keep in mind, some sections will not appear on your report if there are no data to report.
1. Personal Information.
All about you, including your name and/or alias. Your current address and previous address, telephone numbers, email address, and date of birth all are also located in this section.
2. Security Freeze Record.
If you’ve contacted ChexSystems in the past and asked them to stop providing access to your report by banks, credit unions, and retailers that record freeze information will appear here. We don’t recommend a security freeze while you’re going through the dispute process. If you have not requested a security freeze, this section will not show up on your report.
3. Consumer Reported Identity Theft Security Alert.
If you’ve reported Identity Theft to ChexSystems, your complaint will be detailed here. If you have not reported identity theft to ChexSystems, this section will not appear on your report.
4. Reported Information.
Bingo. This is the problem section of your ChexSystems Report. If information appears, you will need to understand it and, where appropriate, dispute it. This section consists of mainly financial institutions who have reported that they have closed a checking or savings account, the reason for the closure, and any amount that is owing at the time of the closure.
5. Inquiries Viewed By Others.
If a bank or other institution has viewed your ChexSystems Report, their “inquiry” will show up in this section.
6. Check Cashing Inquiries.
If you write out a check at Walmart (and many other gigantic retailers), they will run your checking account information through a company called Certegy Check Services. Those inquiries reside in this section and remain for TWO years.
7. Inquiries Viewed Only By You.
This section refers to transactions you may or may not have initiated. For this reason, you may not recognize the source. These inquiries are only viewable by you and are not included in reports to others. The number of these inquiries does not negatively affect your consumer report. These inquiries remain on your file for 1 year.
8. Retail Information.
This section is another problem area if you have listings. It refers to returned checks reported by retailers to Certegy Check Services. In other words, if you bounce a check to Costco or Lowe’s, that negative information will show up here and remain for a period of FOUR years.
9. History of Checks Ordered.
Yes, really. They have a record of the checks you’ve ordered. It’s another way to keep track. That’s why we recommend you order checks from companies that do not share your personal information with ChexSystems.
10. Social Security Number Validation.
Of course, they know your social security number. And now they know the year and state in which that social security number was issued. Getting toward the top of the creepy list.
This is our favorite section because this is where ChexSystems details your right to dispute the information on your report. And it details their requirement to respond within 30 days (21 days for residents of Maine).
What Can I Dispute? The Law Is On Your Side.
In short, the FCRA gives you the right to dispute ANY items on your ChexSystems report you feel may be inaccurate, untimely, misleading, biased, incomplete, or unverifiable (“questionable”). Some background on this statement is warranted.
Banks, credit unions, and retailers connect electronically with ChexSystems on a monthly, daily, and even minute-by-minute basis. This electronic communication is uploaded to ChexSystems and tied to your ChexSystems file with either your social security number or checking account number. There’s no paperwork. It’s all digital.
There is never a verification of any signed documents, signature cards, or contracts. And every day, without fail, ChexSystems adds to their master files of over 300 million consumer reports. And ChexSystems places this information into your ChexSystems report without VERIFICATION. No one is checking if this account and entry are really yours. No one is checking if the information is CORRECT.
ChexSystems believes the banks, credit unions, and retailers are reporting accurately. This could be true, but without verification, no one is sure. The U.S. government realized way back in 1970 that this could be a problem and enacted the Fair Credit Reporting Act (FCRA). The FCRA states that CRAs such as ChexSystems must verify all information they get from banks and credit unions before it goes onto your ChexSystems report.
It stipulates that ChexSystems must have the original signed document (signature card) when you opened the checking or savings account. But since all that paperwork for millions of accounts would be impossible to verify, not to mention how expensive it would be to do so, no one is verifying accounts in this manner. No verification of original signed account documentation ever happens between ChexSystems and the bank or credit union.
If you ask ChexSystems to verify the information on your report, they will send an electronic communication to the bank or credit union asking if the information is correct. The bank or credit union will most likely respond “Yes”, but no one is looking at the original signed documents. And when this happens, ChexSystems is in violation of the FCRA.
Many of the adverse items on a ChexSystems report may be true. If a person disputes the adverse items with a traditional dispute process, most of these accounts will be “verified” and no changes will be made.
But this is not how to dispute items on your ChexSystems report.
The FCRA does not care whether the negative account is valid or not. The correct strategy is to dispute ChexSystems’ right to report the adverse account — not whether the adverse account is valid. Under FCRA, ChexSystems must provide you a copy of the documentation, if you request it. Since they will not be able to provide you such a document, the account will be “unverified” and under federal law, unverified accounts must be deleted.
What To Expect When You Dispute Your ChexSystems Report
First, you will dispute the inaccurate, unverifiable, or unfair items as per FCRA Section 611 (a)(1)(A).
Like virtually every other CRA (the big credit bureaus: Experian, Equifax, and TransUnion are included, too), ChexSystems will “investigate” your dispute. If you get a response to your challenge/dispute from ChexSystems saying the disputed item was “verified” you have the right to request the “method of verification” under FCRA, Section 611 (a)(6) and (7).
ChexSystems must provide the method of verification within 15 days of your request. This is something they typically cannot do, because they don’t actually speak to anyone in order to get verification. Like we mentioned earlier, it is all automated electronic communication and this is insufficient. So we then request the evidence of the verification such as the name, address, and telephone number of anyone from the bank or credit union ChexSystems contacted.
ChexSystems will try to stall the process by giving you a response that… “the source has verified the information to be accurate and complete. As a result, it will remain on file at ChexSystems.” However, you must keep sending your dispute letters.
And, in fact, you need to send each dispute letter by certified mail with return receipt. This tells ChexSystems you are serious and will not tolerate their tactics. All your letters will also include a copy of your Social Security card and driver’s license so that they are able to easily identify that the letter was sent by you.
Some Dispute Dos and Don’ts
Disputing negative entries in your ChexSystems report requires patience, stamina, and organization. It’s assuring to know the rules of the game and execute your dispute strategies even in the face of the stall tactics CRAs sometimes employ. This list will assist in the dispute process.
Do make sure you are familiar with your ChexSystems report.
It can be several pages long and seem confusing. Don’t start disputing until you really feel comfortable you have all the facts about the items on your report.
Do understand that this process could take as little as 30 days and as long as 6 months.
In fact, plan on the latter rather than the former. This process can be frustrating, but you have to follow it to the very end.
Do include a copy of your Social Security card and driver’s license with each dispute.
They require proof that you are who you say you are.
Do include your social security number and date of birth on each letter.
When you include all the required data in your dispute, it alerts ChexSystems they are dealing with an informed consumer.
Do include your ChexSystems Consumer ID on each letter.
This is provided on your initial ChexSystems report.
Do send every dispute letter via USPS certified mail.
This is important so that ChexSystems knows you have your eye on the calendar and that they must respond within the required timeline.
Do be organized.
The paper flow from ChexSystems will surprise you and it will be confusing if you don’t keep your communications organized. Especially important is to keep track of the 30- and 15-day response time requirement. When you receive the USPS return receipt, it will have the date your dispute letter was received and signed for. If you don’t get a response back from ChexSystems dated 30 days after the day they signed for your letter, you can demand they remove the disputed items.
Don’t (as in NEVER) file a dispute online.
Sending the dispute letter through the mail can make it more challenging for ChexSystems to respond within the required 30 days (21 days for Maine residents).
Don’t dispute more than 3 items with each letter.
Otherwise, you’re giving ChexSystems the ability to respond to your dispute with the following language: “We received a suspicious request regarding your ChexSystems report.” That’s a classic stall tactic employed by CRAs.
Don’t dispute directly with the bank or credit union unless you know the data they have sent to ChexSystems is incorrect.
Your dispute process is focused on the fact that ChexSystems is unable to provide original documentation.
Don’t hire a “ChexSystems Removal” service to do what you can do for yourself.
Besides, when you send dispute letters yourself, ChexSystems won’t reject them.
What to Do If Your Dispute Is Unsuccessful
Sometimes, ChexSystems investigations do not resolve disputes, and even the rinse-and-repeat approach we advocate may not work. However, you still have options.
File a Lawsuit in Small Claims Court:
Filing a small claims lawsuit for every violation of the FCRA is likely to result in your favor. A lawsuit would require ChexSystems to pay an attorney to litigate and award you for FCRA violations (each valued at $1,000). However, ChexSystems probably won’t want to do so. Instead, it will try to settle your case outside of court and remove the record against you.
Prior to filing a lawsuit, the FCRA requires that you dispute with ChexSystems. Legal action should be a last-ditch effort, and we strongly advise consulting an attorney or your local legal aid office beforehand for advice on how to file a lawsuit in small claims court.
SAMPLE DISPUTE LETTERS
These letters are samples only and you will need to tailor them according to the circumstances of your case. If you are disputing with both ChexSystems and the bank, you will need to create separate letters for each and address them to the appropriate recipient.
Request for Validation: Letter Number 1
This is the first letter you will send to ChexSystems to initiate your dispute.
Request for Validation: Letter Number 2
Use this letter if your initial dispute results in a generic “verification” of the negative item and ChexSystems is not able to provide copies of the documents with your signature.
Request for Validation: Letter Number 3
You are now 90-100 days into your dispute. Stay strong, because ChexSystems is showing you their very best stall tactics. Stay motivated and keep sending the dispute letters. Customize the template, as needed.
Demand for Removal Letter
You will send this letter to ChexSystems or the bank if you do not receive a response to your Request for Validation letter within 30 days (21 days for Maine residents). If ChexSystems does not respond to you within 30 days of receiving your dispute letter, it is legally obligated to remove the negative record from your report.
You can read a summary of your consumer rights under the FCRA, which will serve you well in your case as well as if you decide to take legal action.