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If you've opened a checking account recently and you didn't have any trouble doing so, it's likely that you haven't heard of Chexsystems. However, if you try to open a bank account and you do have some trouble, it might be because of Chexsystems. The parent company of Chexsystems is eFunds - created in 1999 to serve the financial lending services sector. Its specific mission is to detect fraudulent activity and help financial institutions in their risk management analysis, particularly for their individual customers. While your credit score represents your history in paying bills and the way you manage credit, Chexsystems monitors and reports on your banking activities. It looks for unusual or suspicious banking transactions, overdrafts, cashing checks against insufficient funds and not meeting minimum account balances. In this way, Chexsystems provides two services. It verifies your checking activity and functions as a consumer credit reporting agency similar to TransUnion or Equifax. Just as you can ask for one credit report every year, you can also ask for a Chexsystems report once a year, also free of charge. This is because, like the credit reporting agencies, it is also covered by the Fair Credit Reporting Act. As a consumer, then, you can question any information in Chexsystems, and you can also dispute entries and the evidence that supports the reported activity. Most banks and credit unions in the US use Chexsystems. If a client comes up with some negative reporting, that person may have trouble opening a checking account. Now, is Chexsystems a fair system? In fact, some critics have objected to its reporting practices, stating that the system does not report fairly, and unlike credit bureaus, which have both positive and negative information on your credit report, critics say that it only contains negative information. They claim that this in turn jeopardizes consumers' reputations, when those consumers would otherwise be qualified to open checking accounts. Given the mounting criticism, several banks met in 2000 and they agreed that they would re-consider their policy in approving checking account applications based on Chexsystems reports. Reforms were introduced, some of which include ignoring entries that are more than three years old as long as they are not related to fraudulent activity, disregarding Chexsystems entries that are one year old provided the consumer has settled the debt, and extending the time in which a consumer can repay the debt. What information is provided in the Chexsystems report? A sample report shows us that it is indeed very thorough. The name and address of the person in question appear at the top of the report, along with an ID number and Social Security number. If you should ever write Chexsystems about a report, he you should refer to your social security number and ID number in your correspondence. The first thing you read on the document is that Chexsystems will look into any information or entry that you believe is incorrect or inaccurate. You can send your inquiry to fax number 602-659-2197. After this is the "Reported Information" box. Most of this information comes from financial institutions. It is recorded in Chexsystems for five years. If there is more than one reported transaction or piece of information, items are itemized. Each item details source of the reported information, and the individual in question being reported on, including Social Security number, driver's license number, as well as the type of report done, such as non-sufficient fund's report. Following "reported information" is another box that reads "Inquiries Initiated by Consumer Action." This means transactions initiated by you, the consumer, and shows all your applications for a credit card or any application you made at a financial instituion or bank. This information is kept for up to three years. The third section or box reports on "Inquiries not Initiated by Consumer Action". What this means simply is that other people have asked about you. These people could be your present creditors, pre-approval creditors or potential investors who are trying to assess you as a risk. Your Chexsystems report does not end there. There's another box that says "Retail Information" and this category includes checks you issued to stores and other retailers which were returned. When a store receives a check that they can't cash or deposit because of say, non-sufficient funds, they share this information with a company called Shared Check Authorization Network - (SCAN). It keeps a database of checks that are returned as well as instances of fraudulent activity. Retailers have to be SCAN members to obtain information for check authorization and verification purposes. SCAN information is used by Chexsystems, but Chexsystems does not get involved in the collection of returned checks. If you've ordered any checks, your Chexsystems report also provides this information. It also details the history of your check orders. The next two boxes after this are validation activities for your driver's license and your Social Security number. Your driver's license is processed both with validation and then verification. Chexsystems validates your driver's license by matching your license format with your state's approved format. It also verifies your name and place of birth. Before you write out your next check, then, think of Chexsystems and be sure that there's enough money in the bank to cover your check and that it truly is yours and not someone else's. On the other hand, you can always pay for merchandise with a credit card or with cash.
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About the Article Author
Steven J. Talrechi has been providing information on second chance checking for over 10 years now. Before you sign up for a second chance checking account, please come to our site for all the most current information.
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