Should You be Worried About ChexSystems?

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ChexSystems

Source: web

If you’ve ever heard of Chexsystems, odds are, you have either been on its infamous list of those who should not be granted checking accounts or you know someone who has. More specifically, and accurately, the list contains names that banks use religiously to determine whether they – not Chexsystems – will open a new account for a consumer.

For those who have “been there, done that”, it’s frustrating and sometimes embarrassing. But you should know that Chexsystems is growing fast – partly because of the 17 million Americans who are unbanked these days. And for a majority of those consumers, it’s not because they’re not wealthy, it’s because they got into trouble with bounced checks and NSF charges. Taking it a step further, that 17 million number swelled during the recession when Americans were losing everything – including their bank accounts and credit cards.

Alternative Financial Products

But what happens when a consumer needs access to some kind of financial product or service that will allow them to pay bills, cash checks and even have cash to buy groceries? Enter the check cashing services and payday loans, which are not popular in banking circles and the government. The fees are typically atrocious and those in this business are doing quite well, thanks to the millions of consumers who are desperate for solutions.

Here’s another fact, courtesy of FDIC – personal savings declined sharply during the 1990s. No big surprise there – we saw the effects of a society with consumers that lost faith in the financial sector. But that’s nothing compared to what happened during the recession of a few years ago. The personal savings average rate hit zero, and that was the first time that happened since the 1930s Great Depression.

Chexsystems a Booming Business

With those facts in hand, it’s easy to understand why Chexsystems is doing a booming business these days.

But how do you know you’re on Chexsystems? The last thing you want to do is discover it when you go to open a new checking account or if a check you’ve written at a department store is declined, right? And you certainly don’t want to be forced to use your MasterCard to pay for $30 in groceries; that’s just crazy talk, as my wise grandmother used to say. There’s a way to find out if you are indeed on this infamous list and it’s not difficult – or expensive – to do.

You can call ChexSystems at (800)428-9623. It’s an automated process, so don’t worry about having to explain anything to a customer service rep. In fact, during our research, we learned the last thing you want to do is have a need to speak with anyone at this company. Pulling teeth is easier than getting a live person on the line. You’ll be instructed to visit the ChexSystems website at chexhelp.com. You’ll then receive, via traditional snail mail, a copy of your Consumer Report. In many ways, it’s like requesting a copy of your credit report every year. You’re looking for erroneous entries, accounts that aren’t yours and with Chexsystems, you’re also looking for strange accounts that you didn’t open.

Note that you can also visit consumerdebit.com too, according to CNN. We haven’t gauged that site, but it’s a way Chexsystems is considering in order to better streamline its services.

Fair warning – just like your credit report, you’ll want to get any wrong information corrected, but it’s not a fast or necessarily easy process. You’ll have to jump through hoops in your efforts, so be prepared. On the other hand, this could be the way you learn your identity has been stolen, which as we know, the sooner you know, the sooner you can fix it. We know identity theft is on the rise and we also know that the number of bank hacks have reached such a level of crisis that the president is seeking to work with other countries in order to find the solution.

Chexsystems Facts

Here are some other very interesting facts. Our current population in the United States is 313.9 million as of the last count in 2012. There are 300 million consumers in the ChexSystems database. That doesn’t mean that many people have bounced checks, of course, but it gives you an idea of just how wide ranging the database is. According to an in-depth report from CNN in late 2012:

  • The database includes accounts that are closed due to fraud or abuse
  • The database shows when it was closed and how much was owed at the time it was closed.
  • The database provides the history of a consumer’s payday loans
  • The database provides the history (lifelong) of a consumer’s bounced checks
  • The database keeps negative information for five years.
  • The only way it can be removed prior to the five years is if it’s determined to be inaccurate or the result of identity theft
  • Just like your credit scores, you’re also given a score when you apply for a checking account. That range is 100 to 899.

And, just like your credit scores that a credit card company uses when determining your creditworthiness, even a low scores can still mean you qualify for some kind of account; albeit one with higher fee structures or more restrictions.

Finally, the growing numbers in the Chexsystems database is one reason banks are looking to offer consumers their prepaid debit cards. In terms of future trends, we expect there to be “packages” offered as part of a bank’s efforts of helping unbanked or underbanked consumers get past that status and into a traditional checking account. It’s a work in progress, but if it comes full circle, it could be a great solution for all parties involved.

Have you found yourself on the Chexsystems database at any time? What was your experience? Were you able to remedy it quickly or did you find yourself in a series of frustrating efforts? Share your story with us – we want to hear from you.

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About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


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Advertiser Disclosure

CREDIT DAD is an independent, advertising-supported website. Many debit cards, credit cards and other financial offers that appear here are from companies from which CREDIT DAD Websites receive compensation. This compensation may impact how and where products appear on this website (including, for example, the order in which they appear). CREDIT DAD Websites do not include all card offers in the marketplace.