ChexSystems: Difference between revisions

Eighty percent of commercial [[bank]]s and [[credit unions]] in the [[United States]] use ChexSystems to screen applicants for checking and savings accounts.<ref>BankRate.com [http://www.bankrate.com/brm/green/chk/basics1-6a.asp Checking Basics] tutorial</ref><ref>{{Cite book|title=Starting Over in the U. S. After Getting Your Green Card|last=Baumgartner|first=Elzbieta|publisher=Polpress|year=2009|isbn=9780977045303|pages=157|oclc=312781285}}</ref> eFunds claims that their services are used in over 9,000 banks, including over 100,000 individual bank branches in the [[United States]]. As of 1991, ChexSystems held 7.3 million names of consumers whose bank accounts had been closed "for cause".<ref name=":0" /> Services include verification of identity, reports on account history, and transaction monitoring.<ref>[https://archive.istoday/20140618144959/http://www.fisglobal.com/products-riskfraudcompliance-riskmanagement eFunds Service Offerings]</ref>

A ChexSystems report examines data submitted by banks in the past five years. A report may describe banking irregularities such as check [[overdraft]]s, unsettled balances, depositing [[Check kiting|fraudulent checks]], or suspicious account handling. Banks may refuse to open a new deposit account for a consumer that has a negative item reported. In 1999, ChexSystems was classified as a [[Credit bureau|consumer reporting agency]] governed by the [[Fair Credit Reporting Act]]. Therefore, consumers may retrieve a ChexSystems report annually, free of cost. They may dispute negative items and demand proof of the data contained in the report.<ref>BankRateBanks.comorg [httphttps://wwwbanks.bankrate.comorg/brmbanks-that-dont-use-chexsystems/news/DrDon/20060308a1.asp "NegativeBanks ChexSystemsThat reportDon’t nixesUse accountChexSystems"]</ref>

[[Credit bureaus]] report both negative and positive information about a consumer's use of credit; a ChexSystems report specifies only negative information, if any, about a consumer's use of deposit accounts. Thus, if two customers have both made the same banking errors in the past, while one of them has maintained a number of positive banking relationships as well, both customers might be declined when applying for a new account. A 1991 survey conducted by [[Consumer Action]] showed that ⅔ of California's largest financial institutions banned customers from opening accounts if they were listed with ChexSystems.<ref name=":0" /> The [[Greenlining Institute]] has published a report indicating wide disparities in the criteria banks have used when deciding whether to report negative items to ChexSystems.<ref>{{cite web|url=http://www.ncif.org/images/uploads/RFSI_StretegyGuide_Complete.pdf |title=From the Margins to the Mainstream: A Guide to Building Products and Strategies for Underbanked Markets |publisher=National Community Investment Fund |date=2008 |deadurlurl-status=yesdead |archiveurlarchive-url=https://web.archive.org/web/20120402160258/http://www.ncif.org/images/uploads/RFSI_StretegyGuide_Complete.pdf |archivedatearchive-date=April 2, 2012 }}</ref>

Beginning in August 2000, the Greenlining Institute, a public policy center headquartered in [[San Francisco]], and the [[Federal Reserve Bank]] of [[San Francisco]] held four meetings to discuss possible reform in the treatment of individuals reported to ChexSystems.{{Citation needed|date=July 2020}} These meetings included a discussion of potential best practices which a financial institution could implement to reduce its dependence on ChexSystems data in its decision process on opening accounts. Practices identified include:

Since the meetings at the [[Federal Reserve Bank]] of [[San Francisco]], all participating financial institutions have announced that they will implement positive changes in the way they use ChexSystems.<ref>[{{Cite web |url=http://files.ots.treas.gov//48862.pdf |title=Office of Thrift Supervision] |access-date=September 16, 2008 |archive-url=https://web.archive.org/web/20110721062522/http://files.ots.treas.gov//48862.pdf |archive-date=July 21, 2011 |url-status=dead }}</ref> In September 2000, Bank of America was the first financial institution to announce specific changes in its use of ChexSystems. Revised practices include:

* Disregarding all entries greater than three years old, provided the entry is not fraud-related

* Refraining from reporting customers until numerous attempts have been made to contact them and providing ample opportunity to settle their accounts before a report is submitted to ChexSystems<ref>[http://www.chicagofed.org/publications/profitwise/2002/pwwinter02.pdf Chicago Office of Education] {{webarchive |url=https://web.archive.org/web/20070927093919/http://www.chicagofed.org/publications/profitwise/2002/pwwinter02.pdf |date=September 27, 2007 }}</ref>

Some banks that use ChexSystems also utilize the services of Early Warning Services, LLC, a fraud prevention and consumer reporting agency owned by Bank of America, BB&TTruist, JPMorgan Chase and Wells Fargo.<ref>[http://www.earlywarning.com/about.asp Early Warning Services, LLC] {{webarchive |url=https://web.archive.org/web/20100930031131/http://www.earlywarning.com/about.asp |date=September 30, 2010 }}</ref> Early Warning Services, LLC's website states, "Early Warning Services, LLC, is a fintech company owned by seven of the country’s largest banks."

[[Category:Companies based in DelawareMinnesota]]