ChexSystems Inc. – What Is It, and What Do They Do?

If you have never heard of ChexSystems Inc., that may or may not be a good thing. Most people do not find out that ChexSystems Inc. even exists until they need to open up a bank account – and are turned down.

What is ChexSystems Inc.?

ChexSystems Inc. manages a database that contains the names of people who have been deemed financially irresponsible by their banks. It is estimated that 80% of banks around the country use ChexSystems Inc. to look at potential clients. If you try to open up a bank account at a bank that works with ChexSystems Inc., the bank will check the database before agreeing to anything with you. ChexSystems does not tell banks who to give accounts to, but, if you are listed in the ChexSystems database, it will be difficult, if not impossible, for you to open a bank account.

People who are listed in ChexSystems were reported by their bank. Most of the time, the bank has closed the account ‘for cause’, meaning that the account holder misused the account in some way. If your bank says that they closed your account because you racked up too many overdraft fees, misled them in anyway, or committed fraud of any kind, there is a good chance that you’re listed in ChexSystems.
If you are listed in ChexSystems, you will stay there for 5 years, unless the information listed in your report is deemed to be untrue. Even if you pay back your debts, like outstanding overdraft fees, the bank is not required to remove you from ChexSystems.

How was ChexSystems Inc. created?

More than three decades ago, a retail grocer got tired of receiving bad checks. The grocer decided to create a way for banks to keep track of who was cheating or abusing the system, and ChexSystems Inc. was born.

Today, working with ChexSystems Inc. is the only way that banks can see what kind of history people have when it comes to their checking and savings accounts. After all, bank accounts do not play a factor in your credit rating. You could bounce 100 checks, and it would have no effect on your credit score.

From the banks’ point of view, they are taking a risk every time they open a new account. In most cases, if you bounce a check, your bank will cover the cost of it – but they will expect you to pay them back later. However, there are plenty of people who never pay back their overdraft charges. It costs the banks money, and it is one of the biggest reasons that people are reported to ChexSystems.

ChexSystems Inc. is managed by EFunds Corporation, an independent, publicly-traded company. EFunds is a massive corporation that is involved in virtually every facet of the financial sector. If you have ever written a check, used a debit card, gone to an ATM machine, or sent or received a money transfer, you have dealt with EFunds – even if you’ve never realized it.

How does ChexSystems Inc. operate?

ChexSystems Inc. works the same way as the major credit reporting bureaus. In fact, ChexSystems Inc. is bound by the same federal laws as the credit agencies – including the Fair Credit Reporting Act (FCRA).

However, unlike the credit reporting bureaus, ChexSystems does not have a file on everyone. They only handle people with negative financial reputations. There is no such thing as a ‘good’ ChexSystems report.

Who has access to your ChexSystems report?

Because ChexSystems Inc. is bound by serious federal privacy laws, your ChexSystems report can only be accessed in certain situations, such as:
- If you request a copy of it in writing
- If it is subpoenaed as part of a court case, or requested by a Federal Grand Jury
- If it is needed to complete a business transaction that you initiated
- For employment purposes, with your written permission
- In certain child support cases

If you are currently reported to ChexSystems and need help, check out ChexSystemsAccount.com.