Definition
ChexSystems is a company that maintains lists of consumers that have had bank accounts closed “for cause.”
Analysis
Banks can close your checking account to ChexSystems if you fail to keep it in good standing. Reasons for closing your account may include:
- nonpayment of overdraft amounts and NSF fees
- frequent overdrafts
- fraud
- abuse of account
- falsifying application
If a bank closes your deposit account “for cause,” they will report the incident to ChexSystems. ChexSystems will then maintain a file for you for the next 5 years. The vast majority of banks will automatically review any records at ChexSystems prior to approving a request for a new deposit account.
A negative ChexSystems report does not mean that you may not open a deposit account. It does mean that you are extremely limited in your choice of institution. You may have to contact a number of community-based smaller banks or credit unions to find one that does not conduct a ChexSystems review.
