On Twitter, @nomoredebt4me posed an interesting question:
"Just tried opening an account w/ recommended bank. Was denied and feel like I've been lied 2 @Bankrate now what?"
Unfortunately, @nomoredebt4me's experience isn't unique.
If you've never been denied a bank account, you've probably never heard the name ChexSystems; the bank credit bureau is pretty good at flying under the radar. But if you do find yourself in ChexSystems' clutches, it can get pretty annoying.
ChexSystems basically functions as a credit bureau for banks. It records banks' experiences with you as a customer, especially when you do things banks don't like, such as overdrawing your account and never paying the balance or bouncing a check. Black marks on your report can last for up to five years.
I first heard of the company when a close friend of mine in college was rejected for a bank account and found out she'd inadvertently run afoul of her bank as a teenager. She'd unknowingly overdrawn an account she seldom used, and by the time she'd realized her mistake and paid back the bank, she'd already been reported to ChexSystems. It took her every bit of five years to get off the registry, and the only reason she was lucky enough to get a checking account was the college we attended provided one to every freshman regardless of credit history.
If you've been reported to ChexSystems or denied a bank account for any other reason, here are some steps you can take to try to remedy the situation.
- Visit the ChexSystems website at Consumerdebit.com. Request a free copy of your report. Under the Fair Credit Reporting Act, they're obligated to provide you with a free report once every 12 months. That report will help you figure out which bank or banks reported you and why.
- Contact the bank or banks on the report and try to resolve whatever beef they have with you. It may not be at the top of your list of fun things to do, but if you legitimately owe the bank money and you want to get another bank account in the near future, you'll need to pay up and ask them to remove their ChexSystems report on you.
- If the bank declines to expunge the black mark on your record, they have to at the very least report to ChexSystems they were paid. You can also file a letter, which will be added to the bank's report telling your side of the story. Both steps can help your case when you apply for your next bank account.
- If a bank reported you in error, bring it to their attention and make your case. If the bank won't budge, you'll need to dispute the information with ChexSystems; they're obligated by law to investigate the matter.
If your bid to clean up your ChexSystems file is unsuccessful or if you were denied a bank account for some other reason, you may want to try turning to a credit union or local bank that may be flexible about allowing you to open an account. If all you need is a debit card, you can always try reloadable prepaid card services such as Green Dot, although that presents its own set of challenges in the form of sometimes high fees.
For more information on ChexSystems, see Bankrate's checking basics or ChexSystems' FAQ page at Consumerdebit.com/consumerinfo/us/en/chexsystems/faqs.htm.
On a side note, I'll bet a pretty big chunk of the "unbanked," those who don't have any kind of banking account, don't have one because they've run afoul of a bank and been reported to ChexSystems. If the federal government and others are looking to get more people out of that category, they may want to start there.