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How Banks Use Chexsystems Information

More Banks Considering Changing How Chexsystems Information Is Used

Chexsystems is a company that maintains a database of names. They are kind of like the credit bureau to the banking industry. They are actually considered a credit reporting agency just like the main credit bureaus that we are all familiar with Experian, Equifax, and Trans Union. However people who have never had a problem with their checking accounts have probably never heard of them.

Banks report to them names of individuals who they feel have mishandle a checking account by frequent account overdrafts… bounce checks… did something banks consider as an “act of fraud” or otherwise have an unpaid balance owed to another bank on a closed account.Image result for How Banks Use Chexsystems Information

When that person attempts to open a new account at another member bank, they run your name to make an inquiry. If your name your name comes back, you could find it extremely difficult to open. Many banks will just simply deny you.

The record stays on file for five years and it is estimated that 85% of U.S. banks and credit unions belong to the network. So it can be a challenge to find a bank that is not.

The most important thing to remember is that Chexsystems only maintains the database of names.
It is always up to that individual bank, their policies, and procedures on what they do with that information.

There are millions of people in the U.S. that are in Chexsystems.  Because to this more and more banks are beginning to realize that it is just simply not smart business to automatically deny someone who has a report. More banks are starting to actually look at the report… attempt to get your explanation, and your side of the story… and then make a decision on a case by case basis.

One thing that seems that definitely seems to matter is that if the report shows that you owe money to another bank… and if it is true… then it needs to be paid. There is contact information for Chexsystems below.

Not to long ago, Bank of America announced some changes on how they would handle a Chexsystems report. Some of the key points were:

  • Disregard information on a report that is more than three years old provided the entry is not fraud-related
  • Disregard all information that is more than one year old if it has been paid
  • Disregard even if less than a year, and not fraud, if the consumer has repaid the debt and completes a course in financial responsibility
  • Not even reporting someone to Chexsystems if they owe less than $50 in unpaid overdraft fees on a closed account
  • Increasing the length of time a customer has to repay the debt

However, as you can imagine, Bank of America is a very large company and individual branches, even individual mangers, may have their own policies.

But the encouraging news is that overall things seem to be losing up a little. In the past you were just automatically doom if you had a Chexsystems report. Now many banks are willing to at least talk to you and take a second look.

About Lori Booth

Lori Booth

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