Banks report to ChexSystems the names of account holders whose accounts they have closed for reasons other than a request from the account holder. These are known as "closed-for-cause" accounts. Reasons for closure are normally fraud or a negative balance for an extended period of time.
ChexSystems also contains the names of account holders who reported lost or stolen checks. In these cases the account usually has been closed at the consumer's request. This information is track to see how often a particular individual has made a claim of lost/stolen checks as it may be an indication of fraudulent activity. This information is provided to financial institutions to help protect them against losses from checks written against the closed account.
The number of times a consumer has applied to open an account in the past 90 days is another piece of information tracked by ChexSystems. It helps financial institutions detect check cashing or check kiting schemes, in which fraudsters open several accounts, create the illusion that all contain funds and then write bad checks against them.
The company performs a very necessary service as bank and check fraud are rampant in today's society and growing everyday.
The problems has been that ordinary individuals who may have made a mistake or two with their account can find themselves included on this ChexSystems blacklist.
It is entirely up to the individual banks internal policies and procedures to close someone's account and report them to ChexSystems. A bounce check that they feel you took to long to clear up... a couple of overdrafts within a short period of time... mishandling of a ATM card etc. etc.
ChexSystems also offers collections services to help financial institutions collect the money owed to them. When ChexSystems is successful in getting the money, it reports to the database that the overdue status has been paid.
In addition… every time you order blank checks from Deluxe or one of their subsidiaries, information about you is sent to ChexSystems and their direct marketing relationships program. In other words… in addition to everything else, they are also the source for some of your junk mail and telemarketing calls.
The information includes private, personal information such as your bank account number, current address, and more. This occurs only when you order checks from Deluxe, Current Checks, Checks Unlimited, or Designer Checks. They transmit this information to their sister companies ChexSystems, Debit Bureau, EFunds and SCAN.
If you are not comfortable with this, don’t have the banks order your checks. You can always order checks yourself from plenty of other companies.
If it isn't obvious to you why this is a big deal, and why there is such strong criticism of ChexSystems. Many people truly feel this company who you never even heard of until you were denied from opening a bank account has quietly become the Big Brother of the banking industry.
