ChexSystems is an eFunds check verification service and consumer credit reporting agency like Experian, Equifax and TransUnion. While most credit reporting agencies broker data about how a consumer handles credit relationships, ChexSystems provides data related to how a consumer has handled deposit accounts at banking institutions.



Eighty percent of all commercial banks and credit unions in the United States use ChexSystems as a step in the consumer checking or savings account application process.[1] eFunds claims that their services are used in 9,000 banks, including over 100,000 individual bank branches in the United States. The ChexSystems products offered by eFunds are DebitBureau, DebitReport, FraudFinder, Identity Theft, ID Verification, ICMS, ProspectChex, QualiFile, and Transaction Monitoring.[2]


A consumer's ChexSystems report contains banking irregularities such as check overdrafts, unsatisfied balances, depositing fraudulent checks, or suspicious account handling that other banks have reported in the past five years. The majority of banks that use ChexSystems will not open a new deposit account for a customer that has a negative item reported. In 1999, ChexSystems was successfully deemed a consumer reporting agency, and therefore, governed by the Fair Credit Reporting Act. Consumers are now able to retrieve a free ChexSystems report annually, dispute negative items and demand proof of the data contained in the report.[3]


While eFunds claims to provide fraud prevention products to the general public, many people have criticized the company for what they consider to be unfair reporting practices. For instance, while many CRAs report both positive and negative account histories, ChexSystems reports only contain negative information. Also in comparison to traditional CRAs, ChexSystems does not provide a risk analysis score like the FICO score; therefore many consumers who have kept positive banking relationships for as many as 30 years may have their accounts closed and be blacklisted from opening new accounts based on a single banking error. The Greenlining Institute has published a report indicating wide disparities in the criteria banks were using when reporting negative items to a consumer's ChexSystems report.[4]

Banks Respond

Beginning in August 2000, the Greenlining Institute, a public policy center headquartered in San Francisco, and the Federal Reserve Bank of San Francisco held four meetings to discuss possible reform in the treatment of individuals reported to ChexSystems. These meetings included a discussion of potential best practices which a financial institution could implement to reduce its dependence on ChexSystems data in its decision process on opening accounts. Practices identified include:

  • Training staff to use judgment to assess risk when opening accounts
  • Setting minimum limits to activate the use of ChexSystems
  • Considering the possible override of a customer denial for situations that are beyond the customer’s control, such as a prolonged illness

Since the meetings at the Federal Reserve Bank of San Francisco, all participating financial institutions have announced that they will implement positive changes in the way they use ChexSystems.[5] In September 2000, Bank of America was the first financial institution to announce specific changes in its use of ChexSystems. Revised practices include:

  • Disregarding all ChexSystems entries greater than three years old provided the entry is not fraud-related
  • Disregarding all ChexSystems entries greater than one year old if the consumer has repaid the debt
  • Disregarding certain other ChexSystems entries if the consumer has repaid the debt and completes a course in financial responsibility
  • Increasing the loss threshold for reporting closed accounts from $50 to $100 in overdrafts
  • Increasing the length of time a customer has to repay the debt

During a December 2000 meeting, Bank of America reported that in the first two months under the revised standards, its new ChexSystems policies had resulted in approximately 1,800 ChexSystems "overrides". This allowed 1,800 individuals to open deposit accounts that would have been denied under the bank's former policies. Best practices to address the barriers ChexSystems reports may create for low-and moderate-income individuals include:

  • Increasing the negative balance threshold for reporting customers to ChexSystems from $25 to $100
  • Removing customers from the ChexSystems database if the negative balance is repaid within 90 days (previously, repayment was required within 30 days)
  • Improving the overdraft notification process to include more visible language that explains how the institution uses ChexSystems and the consequences of being reported
  • Refraining from reporting customers until numerous attempts have been to contact them and providing ample opportunity to settle their accounts before a report is submitted to ChexSystems[6]

Some banks that use ChexSystems also utilize the services of Early Warning Services, LLC, a fraud prevention and consumer reporting agency owned by Bank of America, BB&T, JPMorgan Chase and Wells Fargo.[7]


External links

Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Non-sufficient funds — (NSF) is a term used in the banking industry to indicate that a demand for payment (a cheque) cannot be honored because insufficient funds are available in the account on which the instrument was drawn. In simplified terms, a cheque has been… …   Wikipedia

  • Cheque fraud — Cheque fraud/check fraud refers to a category of criminal acts that involve making the unlawful use of cheques in order to illegally acquire or borrow funds that do not exist within the account balance or account holder s legal ownership. Most… …   Wikipedia

  • Check verification service — A check verification service provides businesses or individuals with either the ability to check the validity of the actual check or draft being presented, or the ability to verify the history of the account holder, or both.[1][2] it often… …   Wikipedia

  • EFD (eFunds Corporation) — Infobox Company company name = EFD | eFunds Corporation company company type = Subsidiary company slogan = Make every transaction more valuable. foundation = Minneapolis, Minnesota, USA location = Scottsdale, Arizona, USA key people = Paul F.… …   Wikipedia

  • Advance-fee fraud — African sting An advance fee fraud is a confidence trick in which the target is persuaded to advance sums of money in the hope of realizing a significantly larger gain.[1] Among the variations on this type of scam are the Nigerian Letter (also… …   Wikipedia

  • Fair Credit Reporting Act — The Fair Credit Reporting Act (FCRA) is an American federal law (codified at usc|15|1681 et seq.) that regulates the collection, dissemination, and use of consumer credit information. ( [ Full Statute] …   Wikipedia

  • Chex — A box of Corn Chex. This article is about the brand of cereal. For the Peterborough, Ontario TV station, see CHEX TV. For its sister station in Oshawa, see CHEX TV 2. For the credit reporting agency, see ChexSystems. Chex is a brand of breakfast… …   Wikipedia

  • Overdraft — I warn you, Sir! The discourtesy of this bank is beyond all limits. One word more and I I withdraw my overdraft! Cartoon from Punch Magazine Vol. 152, June 27, 1917 An overdraft occurs when money is withdrawn from a bank account and the… …   Wikipedia

  • Bad Check Restitution Program — A Bad Check Restitution Program is an intermediate agency that works to retrieve funds from bad check writers in order to repay moneys owed to the recipients of the checks.About half of all U.S. states offer some type of Bad Check Restitution… …   Wikipedia

  • List of Delaware companies — includes notable companies that are, or once were, headquartered in Delaware.* Blyth, Inc. * ChexSystems * Citizenre * DuPont * Four Rivers Transportation * Happy Harry s * Harlan and Hollingsworth * Hercules Inc. * House Industries * ILC Dover * …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.