You’ve spent the last hour navigating the grocery store, filling your cart with the items your family needs for the next couple of weeks. Weary, and ready to go home, you make your way to the register to check out.
The cashier scans all your items and shows you the total amount due. You write a check to the grocery store and the cashier puts it through a scanner. Awkwardly, the cashier informs you that your check has been denied even though you know there’s money in your account.
The company recommending the merchant accept or decline your check payment is called TeleCheck. Most of us only become aware of TeleCheck when we have a check payment denied. So, what is TeleCheck? How does it work? How did I get on the TeleCheck blacklist? More importantly, how do I get off their blacklist?
What Is TeleCheck?
TeleCheck is a consumer reporting agency (CRA) that focuses specifically on consumer information related to checks and bank accounts.
Retailers can use TeleCheck to determine how risky it is to accept someone’s check, making a decision on the spot whether or not they’ll accept it as payment. If a check is approved by the TeleCheck system, the merchant is guaranteed that they’ll get the full amount of the approved check.
This is a service most retailers are happy to pay for when it comes to scrutinizing consumer payments being made by check.
Some banks and other financial institutions use TeleCheck when deciding whether or not they should allow a consumer to open a checking account. As we’ve written about elsewhere, these same banks and credit unions use ChexSystems, too. This is done in an effort by financial institutions to reduce fraud and minimize risk as much as possible.
How Does TeleCheck Work?
When you present a check at a merchant that uses TeleCheck, the information on your check is run through the TeleCheck scanning system. TeleCheck uses the information to determine how risky it would be for the merchant to accept your check, based on various factors they have used to create a risk measurement model.
The TeleCheck system works to determine the chances of the check being fraudulent or written on an account without sufficient funds. If the TeleCheck system determines, based on information in their databases and your check writing history, that your check provides minimal risk to the merchant, it will be approved.
Once a check is run through the TeleCheck system, the merchant can decide to accept your check or not based on the results. If TeleCheck approves a check, they are guaranteeing the merchant will get the money.
What Does It Mean If My Check Is Declined By TeleCheck?
If the TeleCheck system declines your check, that doesn’t instantly mean that you don’t have money in your account. The system does not have access to information about how much money you have in your account currently.
If your check is declined by the TeleCheck system, it could mean they don’t have enough information in their database to say whether or not your check should be verified. It could also mean you have an outstanding debt that’s been entered into the TeleCheck system. This debt could be owed to anyone who uses TeleCheck and is usually kept on record for 7 years although TeleCheck has been know to remove negative records after 5 years.
Ultimately, the merchant makes the decision about whether or not they’ll accept your check. TeleCheck is simply used as a resource to help the merchant determine how risky it may be to do so. If a check is declined by TeleCheck, the merchant can still choose to accept it but is also accepting responsibility if the check bounces or is fraudulent as TeleCheck won’t guarantee a check that isn’t approved through their database.
Why Does TeleCheck Decline My Checks?
The process TeleCheck uses to determine whether to recommend the retailer accept or decline your check is impossible to know. However, there are clear indicators that can affect the outcome.
Our research indicates that there are several main reasons that influence your ability to have a check accepted at the cash register. Becoming familiar with these issues will help you understand why TeleCheck continues to have impact on your check writing abilities.
1. Insufficient History in Your File
If you don’t write many checks, TeleCheck may flag your inactivity as a marker for risk. In other words, TeleCheck may decide it does not have enough data to provide the retailer with an approval.
This denial, unfortunately, results in having your check denied. Regrettably, it is the same problem you’d have if you were attempting to get approved for a credit card, but didn’t have enough of a credit history to qualify for one.
2. Risk Variables
There are a number of variables TeleCheck uses to determine the risk related to accepting your check. This includes related statistical data which may indicate that fraud is likely to occur.
The statistical data might include the type of goods being purchased, the amount of the purchase, and even the type of retailer generating the TeleCheck inquiry. For example, if you are purchasing a $650 smartphone with a check at Walmart, TeleCheck may opt to score that purchase as unusual or risky. Even if you’ve been buying groceries from Walmart for years each week on the same checking account.
3. Unpaid Debts
If you’ve incurred unpaid fees such as overdrafts and non-sufficient funds (NSF) or other infractions with your bank, they can come back to bite you. TeleCheck tracks check debt and this history plays an enormous role in whether or not a retailer accepts your check. Even if you eventually pay off that debt, it’s still attached to your history with TeleCheck. For 5-7 years!
4. Previous History With TeleCheck
Your TeleCheck profile is also flagged if you have a history of writing bad checks. This category includes writing checks without adequate funds in your account or attempting to “float” a check for a few days until your bank receives your next paycheck. TeleCheck considers these infractions serious as they are entirely specific to your personal financial behavior.
5. Human Error
Even in our increasingly technology-based environment, human error continues to take a toll. And there is a chance that a denial from TeleCheck is affected by this factor. There are a number of points along the check approval process where human intervention can lead to a TeleCheck denial.
For example, a cashier might have keyed your information incorrectly into the TeleCheck point-of-sale device. Additionally, any accidental errors in the information listed on your form of identification (such as your driver’s license) can trigger a TeleCheck alert.
6. Victim of Fraud
At some time you may have reported fraud to your bank or the police. A report of fraud about your bank account, even if you made the report yourself, may cause your checks to be declined in TeleCheck. For instance, if you reported stolen checks, that information is typically forwarded to the consumer reporting agency and any check numbers from that checkbook would be declined.
You might also unknowingly be the victim of fraud. If someone uses your driver’s license number while attempting to cash fraudulent checks, that will almost assuredly raise red flags. So, if your personal information was compromised and you aren’t aware of it, that information can be linked to your TeleCheck account.
What Are TeleCheck Codes?
When you get a denial from TeleCheck, you also receive a code explaining the reason for the denial. There are two codes most commonly provided: Code 3 and Code 4.
TeleCheck Code 3
If you receive this code for an attempted transaction, it means that TeleCheck did not have any specific negative information on file for you, but your check was declined for other reasons. You might get a Code 3 if you rarely write checks, or if you happen to match a risk profile in the system.
Still confused? Here’s a response directly from TeleCheck that provides more detail:
“In general, the Code 3 is a risk decline that is generated per transaction and is based on, but not limited to, the consumer’s check writing history, check writing activity, dollar amount and the parameters that TeleCheck has in place with the specific merchant. Unfortunately, the initial generation of the Code 3 is not related to how much money a person has in his or her account.
There is no way to provide a general answer in response to a Code 3 because that will differ from check writer to check writer. If a check writer’s check is declined at a TeleCheck merchant , they can call Customer Service @800-366-2425 to speak with a representative regarding the check decline.”
TeleCheck Code 4
This is the code which will be issued if there is specific negative information on file for you. This code represents a rejection or decline from TeleCheck on a more serious level where the database recognizes several key piece of information that prevent the warranty and security in order to let the check be processed. Usually this code signifies a major alert for fraud potential from the check owner.
How Can I Dispute TeleCheck?
Since TeleCheck keeps and sells consumer information, they are considered a consumer reporting agency and are regulated by the Fair Credit Reporting Act (FCRA). You are able to dispute an item in the TeleCheck system just like you would dispute an item on your credit report.
If your check is declined by the TeleCheck system at a retailer, you should be given a seven-digit record number. You can contact TeleCheck directly for more details about that specific instance by providing the record number.
If you’re suspicious there might be an error in the TeleCheck database, order a copy of your TeleCheck report at the address below. By law, TeleCheck must provide your report free of charge once every 12 months if you request it. Carefully examine your report and ask questions about anything that seems a little off or is unfamiliar to you. It’s always better to ask and have it turn out to be something you were aware of than than to not ask and later find out there was an error.
One difference between TeleCheck and ChexSystems is that an item is removed from the TeleCheck system as soon as it’s paid. ChexSystems may keep an item in their system for up to five years, even after you’ve paid it, unless the bank requests it be removed or you dispute an item successfully.
How Can I Get In Contact With TeleCheck?
To get a copy of your TeleCheck report, send a letter to:
TeleCheck Services, Inc.
Attention: Consumer Resolutions-FA
P.O. Box 4514
Houston, TX 77210-4514
You’ll need to include information to help TeleCheck confirm your identity:
(1) your daytime phone number
(2) a photocopy of your driver’s license
(3) your social security number
(4) a voided check (NOTE: Many experts warn against sending in a voided check and state that the rest of the documents should be sufficient)
TeleCheck Phone Numbers
Declined Check Information for Check Writers
Returned Check Collection
Call to get your Free Annual File Disclosure pursuant to the Fair Credit Reporting Act
Fraud, Identity Theft, Forgery
How Does The Dispute Process Work?
Thanks to federally mandated laws, TeleCheck must investigate all disputes within a certain time period. If you were denied the opportunity to use a check at a merchant and have the reason code, you can request a report for free. In that case, TeleCheck has 30 days to respond. If you requested a free report, that gives TeleCheck 45 days to respond. As part of the investigation process, TeleCheck will attempt to verify the information from the company that originally reported you. If you don’t receive an answer from TeleCheck from either 30 or 45 days from the date they received your dispute letter, they must remove the entry.
This process is called “verification”. If an item can’t be verified within the mandated number of days, it must be removed from your report. But, just like negative credit items, any verified items on your TeleCheck report remain on the report for up to seven years. However, in many cases it’s possible to have those items successfully removed early.
Is Second Chance Banking Right For You?
If you continue to have problems with Telecheck, “Second Chance Banking” may be the answer for you. While most major banks don’t offer second chance checking, but many community banks and credit unions have them under various names, such as Opportunity Checking and Fresh Start Checking.
Our editorial staff regularly updates the list of banks offering second chance checking in every state. Here’s an overview of these accounts and where you can find them at branches in your area.