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ChexSystems puts him in penalty box

Dr. Don TaylorDear Dr. Don,
I have problems with ChexSystems and cannot open a checking account at this moment. I found a Web site online that says it will make it possible for me to open a check-less checking account that will allow me to pay bills and make it better for me to use my paycheck by using direct deposit. Have you heard about DirectChecking.com? What can you tell me about it? Is this true?
Thanks in advance,
-- Jose Jump-start

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Dear Jose,
Negative information on your consumer banking report with ChexSystems can make it next to impossible to open an account with a bank that uses that report in making its decision to accept you as a customer. Negative information stays on your consumer report for five years before it drops off.

What DirectChecking.com is offering looks like a product called a stored-value card. It gives you a "checking account" without giving you any checks. By forcing you to use its ATM/debit card or bill-paying service, it can check your balance in the authorizing process and doesn't have to worry about you writing bad checks. Checks are an optional feature if you sign up for direct deposit. You can also link a MasterCard to the "account" like a secured credit card for an extra fee.

I'm using the "quotes" because I'm not very comfortable with this whole arrangement. The account forms list EasyTel/Genie Bank, but you make your deposits at a Bank of America or a Wells Fargo branch? You have to pay $35 for an ATM card? Checks are an option?

I went to the FDIC site to see if EasyTel/Genie Bank is an FDIC-insured institution. I couldn't find it listed. Bank of America and Wells Fargo are FDIC-insured institutions. If the account is with one of these banks, why do you need EasyTel/Genie Bank as an intermediary?

The Federal Reserve Bank of New York, in an article entitled, "Stored Value Cards: An Alternative for the Unbanked?" has this to say about stored value cards:

Specifically, consumers should be aware that some cards do not currently provide federal deposit insurance to protect the card holders' funds in the event that the issuing bank fails. In addition, some cards do not provide protections under Regulation E, which covers debit cards linked to traditional checking accounts. Regulation E has several requirements, the most important of which are provisions for fund replacement in the event of lost or stolen cards. Visa- or MasterCard-branded cards offer zero-liability policies, although consumers should be aware that these association and/or firm-specific policies are not the same as Regulation E protections.

The primary objective of Regulation E is the protection of individual consumers engaging in electronic fund transfers. Recently proposed changes in Regulation E would have its provisions extend to stored value cards.

Not all banks use ChexSystems. Some Web sites maintain a list of banks that don't use the consumer-reporting agency. This site, http://chexsys.tripod.com, has a free list of banks that don't use ChexSystems.


-- Posted: Nov. 9, 2004





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