It’s typical for consumers in ChexSystems to want to get removed from ChexSystems as soon as possible. ChexSystems can contain negative information for 5 years and that’s a long time to be branded unworthy of a checking account.
But ChexSystems removal can be complicated if you don’t know what landed you in ChexSystems in the first place.
ChexSystems compiles information reported by banks and credit unions on customer accounts that experienced problems with their bank accounts. Other banks and credit unions then use these reports when deciding to open up new accounts for potential customers.
The biggest problem with ChexSystems is that negative checking account information is generally lumped into two very broad categories:
- Account Abuse
- Suspected Fraud
Account abuse is when a bank believes that a consumer has not complied with the terms of that account (e.g., unpaid overdrafts or unpaid fees). Fraud includes instances that the bank or credit union says were intentional acts of consumer fraud (e.g., check fraud).
These major categories (account abuse and fraud) are derived from actions or behaviors a checking account customer unknowingly engages.
You may have negative information in your file if:
- Your account was involuntarily closed due to unpaid account balances, such as from an overdraft.
- You were suspected of fraud related to a checking account.
- You had a joint account with someone else who had these types of problems.
- Retailers reported you for bounced checks.
- Several financial institutions have placed inquiries about you short periods of time, such as you’ve made an attempt to open several accounts in a specific time-frame.
- You have multiple check orders in a short period of time.
Other information that may be in a ChexSystems report:
- A list of prior accounts and contact information for the providers of information about those accounts,
- Whether there was a “negative closing balance” associated with any of the reported accounts, meaning that the bank or credit union reported that the consumer owed money when the account was closed. This includes negative balances resulting from unpaid fees,
- The current status of any reported negative balances (paid or unpaid),
- Reason codes to indicate why an account was closed with a negative balance, Personal information to allow matching of reports with consumers, such as social security number and address information,
- A record of account inquiries from other financial institutions where the consumer applied for an account, and
- Information from public records.
To get removed from ChexSystems you have to be willing to either dispute the ChexSystems report or dispute the bank that reported you; settle the amount owed to the bank in exchange for a deletion of the ChexSystems record; or, lodge a complaint with the regulatory agency overseeing the bank or credit union.
Let’s dive deeper into these options for ChexSystems removal because all of them require different strategies.
» Learn what Banks offer Second Chance Checking
Strategy 1 – Use the dispute process to get removed from ChexSystems
ChexSystems must comply with the federal Fair Credit Reporting Act (FCRA). This means they must take steps to assure that the information they provide to the banks is accurate.
Get a copy of your ChexSystems Report. You are entitled to a free report every 12 months. Or, if you have been denied a bank account due to information in your ChexSystems report, you are entitled to a free copy within 60 days of the denial.
How to Order your ChexSystems Report
Online. To get your ChexSystems report you can order it directly from ChexSystems by completing an online form. ChexSystems does not allow you to view your report online. Once you submit the ChexSystems Report online form, the report will be sent to you via US mail within five business days.
Call ChexSystems. If you prefer to call ChexSystems for your ChexSystems Report, the telephone number for ChexSystems is 800.428.9623. This is an automated voice messaging system.
Mail ChexSystems Report Form. On the ChexSystems website, fill out the consumer disclosure form, print it out and mail it to Chex Systems Inc., Attn: Consumer Relations, 7805 Hudson Road, Suite 100, Woodbury, MN, 55125.
Adverse Action Notice. If you are denied a bank account based on the information contained in your ChexSystems report, the bank or credit union must give you a notice that includes the name of the consumer reporting agency that provided the negative information. You can then request a free copy of the report: If someone is denied an account, they are entitled to a free copy of their report within 60 days of receiving the notice.
Once you have the report in front of you, look for errors in the following areas:
- Banks names
- Reasons you were reported
- Amounts reported
- Age of records – ChexSystems can’t include most negative information that’s more than seven years old (but typically will remove once it’s five years old).
Dispute anything that isn’t 100 percent correct. Typical inaccuracies can range from personal information being incorrect, to information about the account, such as how much is owed or whether any money is owed at all, to cases of potential identity theft.
Dispute errors with ChexSystems or with the Bank. You have the right to dispute incorrect information with both ChexSystems and with the bank or credit union who supplied that information to ChexSystems.
ChexSystems must work with the banks and credit unions to investigate consumers’ disputes of errors or inaccurate information on the ChexSystems reports.
If errors are discovered, ChexSystems is required to update that information within 30 days of their receipt of the dispute. The information must be verified as accurate or it must be deleted. If the bank or credit union fails to verify the information within 30 days, then ChexSystem must delete the record.
» Learn more about how to dispute ChexSystems
Strategy 2 – Confront the bank directly to get removed from ChexSystems
Bank managers have more power than you may think. Often banks report customers in the overly broad categories of account abuse or fraud when no such actions were ever intended by the bank customer.
Request a sit-down with the branch manager to explain what occurred with your account. Banks can sometimes cause the very overdrafts they reported about you to ChexSystems.
Here are two examples where bank practices may cause being reported for account abuse:
Example 1. Overdraft lines of credit can come with hidden costs and confusing terms which end up entangling customers in a cycle of debt. Banks typically charge up to $38 every time a customer spends more than the balance in their checking account. Those fees add up. One mistake has the potential to push a checking account into the red, causing multiple overdraft fees in a single day.
Example 2. Customers may unknowingly agree to a bank practice known as reordering in the fine print of their checking account agreement. Reordering is a deliberate practice where large transactions like mortgage payment are processed first before taking out smaller charges, like a purchase of coffee — even if customers bought the coffee first. By arranging the order of transactions, the banks could maximize the number of overdrafts they charged. It may seem like the bank is on your side by processing the larger, more important transaction first, but the practice is insidious when it causes a slew of small transactions that result in a $38 overdraft per transaction fee.
An in-person conversation with a bank manager may clear-up misunderstandings between you and the bank. If the branch manager agrees to remove you from ChexSystems, get the agreement in writing.
Most “bank policies” can be overridden by a branch manager — You just have to ask. But make sure the branch manager knows your next step is to make a complaint with the state regulatory agency; or, if it’s a credit union, the board of directors in addition to the state regulatory agency.
» Learn what Banks don’t use ChexSystems
Strategy 3 – File a Complaint with the Bank Regulatory Agency
Find out who regulates the bank. More than likely your state’s website will let you know the department in charge of banking. On the federal level, contact the Federal Deposit Insurance Corporation. The FDIC’s Consumer Response Center is responsible for investigating all types of consumer complaints about FDIC-supervised institutions and responding. The Consumer Financial Protection Bureau also handles bank complaints.
Find out who regulates the credit union. Federally chartered credit unions are regulated by the National Credit Union Administration, while state-chartered credit unions are regulated at the state level.
Conclusion on ChexSystems Removal
ChexSystems Reports don’t always provide enough account details that led up to the negative reporting. Hopefully, you’ve kept good records and past statements to determine the events surrounding the ChexSystems records.
Past banking mistakes don’t dictate how you’ll currently manage a bank account. People without access to banking services may not have a savings account which impairs the ability to save for the future. Having poor credit can also be an obstacle to opening a bank account. If that’s the case with you, consider opening a bad credit bank account.
Without access to a bank account means lack of access to affordable credit to purchase a home or car, get approved for a student, business or personal loan. Building a positive banking relationship is important. Review the list of second chance banks and banks that’s don’t use ChexSystems to open a new account and get back on track.