What to do if it is included in ChexSystems
“… Sorry, my bank can’t help you. It’s listed in ChexSystems …”
My wife and I just moved from South Bend, Indiana to Indianapolis. We needed a checking account. We both wanted to start over after bankruptcy, and opening a new checking account at a new bank seemed like a good starting point.
I decided to go with a national bank and found a branch on Fall Creek Road in Indianapolis near Geist Reservoir. I was nervous.
The thing about filing for bankruptcy that most people have a hard time understanding (unless they have gone through it themselves) is the feeling of inferiority. Each new application for credit can cause anxiety.
I will share a quote that helped me get through this stressful time in my life. It’s from Eleanor Roosevelt. She said …
“No one can make you feel inferior without your consent.”
I love that quote.
So I walked into the bank branch with the attitude: “Everybody knows that I declared bankruptcy, so what?” I asked to be directed to the person who could open a new checking account for me.
The lady at the counter who started talking to me about opening an account was very nice … until she found my name on ChexSystems.
Then everything changed …
“… Sorry, my bank can’t help you. It’s listed in ChexSystems …”
That was that.
I left the bank without a checking account because of a company called ChexSystems.
What is ChexSystems?
ChexSystems is a checking account verification company based in Woodbury, Minnesota. Banks and credit unions use them when people apply to open a checking account. It is essentially a consumer reporting agency designed to check whether people have a history of writing bad checks. If you are listed on ChexSystems, you are generally not allowed to open a checking account at that bank.
ChexSystems is the largest player in the check verification industry. However, there are other companies that provide similar services, such as Equifaxreg’s TeleCheck and Decision Power Insight;
I will focus on ChexSystems as they are the biggest.
Are you blacklisted by ChexSystems?
There are several actions that can put you on the ChexSystems blacklist …
– Fraudulent handling of a checking account
– Decline a check that results in insufficient funds (NSF)
– Overdraft your account while using your ATM or debit card
– Have your account “closed for cause”
One of the most common ways to appear on ChexSystems occurs when you move or change banks. Because check and debit card fees don’t appear on your account as soon as you make them, you may be charged for insufficient funds after thinking you’ve closed your old bank account.
The best way to avoid this problem is to leave your old account open until you are sure that all your transactions have cleared.
Once you are listed with a check verification service like ChexSystems, it is best to pay off what is owed. Also, be sure to request a letter on that bank’s letterhead stating that all debts have been paid.
Now, you would think that if you include an unpaid check in your bankruptcy petition, your debt will be erased, I personally did not find that to be the case.
I learned that the entries remain on your ChexSystems report (even if they are paid) for five years. So if you think you are safe because you paid the check or included it in your bankruptcy, you may not be.
This was my experience with ChexSystems. Yours may be different. If you have a ChexSystems story to share, go here to tell me about it. I will collect all the information and share it with everyone in a future issue.
How to know if it is included in ChexSystems?
You will not be able to open a new checking account or you will have difficulty getting stores to accept your checks.
You see, the same corporation that owns ChexSystems also owns SCAN, the company that verifies checks at places like Wal-Mart or your local grocery store.
When you write a check in a store and they run it through that little machine at the cash register, they are looking to see if you are included in the SCAN or ChexSystems databases. If so, they will generally not accept your check.
If they accept your check, ChexSystems has guaranteed that it will be accepted by your bank. If you bounce like a rubber ball, ChexSystems will pay the merchant the amount of the check out of your pocket … then you will not only have to pay your bank’s NSF fee, but ChexSystems’ fee as well … which can get expensive.
The best way to know if you are on ChexSystems is to review your ChexSystems report. Since they are a consumer reporting agency, ChexSystems has to follow the Fair Credit Reporting Act (FCRA) and the new Fair and Accurate Credit Transactions Act (FACTA). This means that you are entitled to a free copy of your ChexSystems report every year.
What I discovered by accident
After my unexpected rejection from the bank on Fall Creek Road, it took me a few days to regroup.
My wife and I shared a car at the time, and she had a job interview at a RE / MAX real estate office near Geist Reservoir.
As I waited for it, I noticed that there were three new benches within a stone’s throw of each other. Literally one on every corner of the road. What were they thinking? Neither branch seemed busy. I guess they were tripping over each other to win over new bank customers … even the ones listed on ChexSystems.
So I took a chance.
I locked the car, hoping Michele wouldn’t come back right away. Then I chose the bench that looked newer. I went in and asked to be directed to the person who could open a new checking account for me.
I sat in the branch manager’s office. And while I was going through the routine jokes, I noticed that he was searching his drawer for a new beginner checking account kit.
Then I spoke up and asked, “But what if I’m on the ChexSystems list?”
His answer surprised me.
“We don’t use CheckSystems. I’d love to open an account for you.”
And so he did.
I got back to the car, excited to share my discovery with Michele. We had a checking account with a bank!
What I hope you will deduce from this is that not all banks or credit unions use ChexSystems. It may seem like it in some cities, but they are not used by 100% of financial institutions at all.
How to get a checking account if it is listed in ChexSystems
The best way is to find a bank that does not use ChexSystems to verify new accounts.
Here’s how to do it …
1. Start by making a list of all the bank branches in your area. You will do better if you stick with the smaller local banks and avoid the big ones.
2. Call and ask to speak to the branch manager.
3. Find out about their different checking account programs. (How much money do you need to open an account, how long does it take, can you do it online, what check number will they start at, etc.)
Four. Then ask how they verify new accounts. Do they check your credit report? If so, what credit report and credit inquiry will lower your credit scores? (Of course, you know the answer to this question is yes, but let’s see how many are telling you the truth.) If so, which one?
If the branch manager tells you they don’t use ChexSystems, you have a winner! Be sure to write down the person’s name and make arrangements to stop by and open an account. If the branch manager tells you they use ChexSystems … here’s what to say next …
“… Damn. I’m on the ChexSystems list and they’re a bear to deal with to figure something out. Is there anything I can do to get an account with you?”
If they say “No”, ask them …
“Do you know of a local bank that doesn’t use ChexSystems or a program that can help me open a new bank account?”
Sometimes you can speed up your search by asking for help. It only takes a few seconds to ask, but the correct answer can save you hours of research.
A new trend in development
I have noticed that more and more banks are reviewing credit reports rather than using check verification services. Sometimes they even do both! I would not open an account at a bank that does this, mainly because your credit inquiry will lower my credit score. So keep looking.
Banks that really care
Some banks are willing to give even bankrupt people a break. If you are looking for a new bank and think you may have trouble getting a checking account, ask if they have some kind of “second chance” or “fresh start” program.
Many banks have trial programs that offer limited services for a set period of time (usually six months). If you really need a checking account, these programs can save your life.
There are also two specific services that many banks and credit unions are joining. These programs basically allow you to take a course on how to manage a checking account. And when you complete the course, you will receive a certificate to open a checking account at a participating bank or credit union.
The two programs are called Get Checking and InBalance. Get Checking is more geared towards banks, while InBalance is more geared towards credit unions.
So don’t be afraid to ask. Remember what Eleanor Roosevelt said …
“No one can make you feel inferior without your consent.”
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