ChexSystems reports to credit bureaus on how customers manage their bank accounts, affecting their ability to open future accounts; it may also work as a collection agency. Resolving the issue and providing proof can result in the report being removed.
ChexSystems, formerly known as Chex Systems, Inc, is a Delaware-based agency that reports to credit bureaus on how customers manage their bank accounts. Essentially, when an overdraft to a bank remains unpaid, and if the bank account is closed, ChexSystems reports this information to credit bureaus such as Equifax, TransUnion, and Experian. This can affect a person’s ability to open future bank accounts, as approximately 8 out of 10 banks and credit unions use ChexSystems to find customer information.
Typically, when a customer has not used a bank account in a fraudulent manner, such as depositing fake checks or failing to settle overdraft payments and penalties, ChexSystems does not have a record or history of your account. If you have a history of writing bad checks, not paying them, or having bank accounts closed due to suspected illegal activity, you may not be able to open a new checking or savings account. This is not always the case. Some banks ignore the information if the amount was small or if the breach occurred several years ago. Each bank establishes its own laws in this regard and some do not use the system.
In addition to working as a credit reporting agency, ChexSystems may work as a collection agency, attempting to collect money from people who have left a bank or closed their account with large outstanding overdrafts. Some banks use other collection agencies for this purpose, or try to collect the money themselves. One problem with this system is that many people clear their overdraft amounts and it still shows up with an unpaid overdraft in the system.
What ChexSystems and the paying bank cannot do is clear up the fact that you are still presenting with an overdraft. The company’s website states that reporting members (banks) do not have to report if the issue has been resolved. However, if the amount is collected through the agency of the company, this must be taken into account. You may not know that a report still exists, but you can request a report from ChexSystems to see if it still shows an outstanding balance or an incorrect report.
The best way to find out if you have a problem is to read the requested report and see if you owed money to a bank or the company’s collection agency. Show them proof once you have resolved the issue and request that ChexSystems delete your account. This may not always work, and you can still prove that you had a non-compliant account, though often once the issue is resolved and you can prove it to the company, the report is removed.
If they don’t remove the report, or if you believe this amount is in dispute, you can attach a personal statement to your report, which may or may not be considered by other banks or credit unions. However, most of the time, to clear your account, you have to pay the money owed and then make sure the company removes the report. Please check back in a few days and request a report verifying that the matter was handled.
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