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What is ChexSystems?
Ask the average American who or what “ChexSystems” is, and you’ll get a blankstare. The unlucky people who do know about ChexSystems are usually painfullyaware of how severely it can affect their lives. If you are on ChexSystems’ list,you have probably experienced the pain and frustration of not being able to opena new bank account, write checks, or use an ATM card (the core bankingconveniences that everyone seems to take for granted). Unfortunately, millions of Americans are on (or have been on) the list, and are unable to enjoy thesebanking conveniences.If you are on the list, it is important for you to know whatChexSystemsis (andwhat they are not). ChexSystems is not a bank or a financial institution. Instead,they are a large consumer reporting agency (CRA) that maintains a nationwidedatabase of banking customers who have been reported for writing bad checks,defrauding banks, having unpaid bank debts, or having too many “non-sufficientfunds” (NSF) items. ChexSystems is owned by a large publicly traded company,eFunds, Inc. ChexSystems tries to (and has succeeded!) keep a low publicprofile. They don’t have a company Web site, and it is relatively difficult to findinformation about them.Like the other large CRA’s (such as Experian and TransUnion), ChexSystemstries to distance itself from the problems it causes, claiming that it is simply aprovider of information, and that it is the banks who use ChexSystems’ data whoare the bad guys for turning customers down for new bank accounts.ChexSystems’ marketing materials claim that the company has no responsibilityfor the decisions banks make, stating that “ChexSystems neither approves nor declines accounts for banks and credit unions. The decision is entirely up tothem.”This is a convenient position to take. However, the fact is that ChexSystems (likethe other CRAs) is not perfect. They make mistakes and errors can find their wayinto consumer’s records. The problem is that an error in a ChexSystem recordhas a severe and dramatic impact on a consumer. Even a simple error in aconsumer’s banking history can prevent that customer from opening a new bankaccount (or could even result in the customer having their current bankingrelationship terminated!). That is a LOT of power for a CRA to have.Other consumer’s find out that their banking record has been ruined as a result of identity theft. For example, a common scheme for some identity thieves is toopen a bank account under someone else’s name, using a stolen social securitynumber, and then take out a payday loan or two using the assumed identity. Thefunds are then withdrawn from the account, and the account is abandoned,eventually resulting in an account closure or NSFs. Unfortunately, the personwhose identity was stolen now ends up on ChexSystem’s list. Unless you take
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