ChexSystems is a consumer reporting agency just like Experian, Transunion and Equifax. This means consumers have the right to dispute any information contained in a ChexSystems Consumer Report.
Many consumers never heard of ChexSystems until a bank denies opening a checking or savings account. Consumers can dispute ChexSystems information which is a good idea since a negative ChexSystems report can lock you out of traditional banking for 5 years.
ChexSystems is subject to the Fair Credit Reporting Act and must investigate any dispute you submit.
» Open a Checking Account: No-ChexSystems Banks
When you dispute ChexSystems, they have 30 days to investigate consumer disputes. If the disputed item is not verified by the reporting bank, financial institution or credit union, they must delete the negative item from your ChexSystems Consumer Report.
ChexSystems Dispute Process
Dispute ChexSystems errors, mistakes and inaccurate information. Once you lodge the dispute with ChexSystems, they must send the dispute to the bank that reported the negative information to verify. In other words, any information that is disputed in ChexSystems must be verified by the bank as accurate or the information must be deleted.
ChexSystems has 30 days from the date your dispute is received to conduct an investigation. If you obtained your ChexSystems report by requesting it from the FACTA Free Annual Report Annual the law extends the dispute response period to 45 days.
Keep in mind that paying money owed to a bank does not prohibit a bank from reporting the account to ChexSystems. Banks don't have to remove negative items just because they are paid. They are required to report accurate information about your banking history, not your current situation.
» Dump your prepaid card: Bank accounts for bad credit
Reasons banks report to ChexSystems
Consumers reported to ChexSystems may wonder what are the reasons they were reported to ChexSystems in the first place. An example of what information may be contained in a ChexSystems report is not paying overdrafts or repeatedly depositing checks that are uncollectible a bank may report you to ChexSystems.
ChexSystems typically lumps negative information into two very broad categories—account abuse and suspected fraud. But there's a huge problem with the “account abuse” and “fraud” categories used by banks and checking reporting companies. Neither the banks nor the checking reporting companies have a standarized definition of account abuse or suspected fraud.
If a bank believes a customer has not complied with the account terms (e.g., unpaid overdrafts or unpaid fees) they could report the customer as an account abuser. The same exists for customers reported for suspected fraud. Unknowingly depositing a bad check can constitute check fraud.
More reasons banks report customers to ChexSystems
It's important to have some idea why you were reported in order to formulate the proper argument for the dispute.
- Involuntary Closure – Account was closed the bank for unpaid negative balance from overdrafts and fees
- Suspected fraud related to a checking account like depositing uncollectible checks
- Joint account with someone who had unpaid overdrafts or is accused of account abuse
- Information from public records
Guide to Dispute ChexSystems Report
1. Request your ChexSystems Report
You will need your ChexSystems Report in order to initiate disputes. A free checking account report from ChexSystems is available to consumers once every 12 months or if you have been declined a bank account during the past sixty days where ChexSystems was used in the decision process.
Note: During the COVID-19 Pandemic, consumers can get a free ChexSystems report up to 3 times every two weeks.
- You can request a report by calling their automated voice toll-free number at (800)428-9623.
- Visit the website and fill out the consumer disclosure form. Submit it online to receive it instantly or print it out and mail it to:
Chex Systems, Inc.
Attn: Consumer Relations
PO Box 583399
Minneapolis, MN 55458
When disputing information in your ChexSystems it's better to write a dispute letter and send it via certified, return receipt U.S. mail. Disputing online makes it more difficult to create a paper trail in case you need it at some later date.
(MORE: Find second chance banks to open new accounts)
2. Dispute ChexSystems Errors
Once you have your report in hand, review the information carefully to see if there is any inaccurate information or errors listed. If you find information that you believe is wrong, gather supporting documents, such as payment records or bank statements. The Dispute Section on the ChexSystems website allows you to choose how to submit your dispute:
- Online
- Via mail by completing a dispute form and mailing to:
Chex Systems, Inc.
Attn: Consumer Relations
PO Box 583399
Minneapolis, MN 55458 - Via fax at 602.659.2197
- By telephone at 800.513.7125
NEVER give ChexSystems more information than is required for them to access your files. Remember, they are a consumer reporting agency and whatever information they collect only helps them, not you.
Under the Fair Credit Re porting Act the only information needed to confirm identity is your name, current address, date of birth, Social Security number; and, the bank name and account number in dispute. Do not give them a history of your banks accounts for the past 5 years.
»Investigate and correct errors: Once you submit a dispute to ChexSystems, they must investigate the inaccurate information contained in the consumer's report and correct disputed inaccurate information.
»Verified ChexSystems Disputes: Once your dispute request is received ChexSystems must confirm they contacted someone at the financial institution to verify the information in dispute. Verified information remains in your file for up to 5 years. However, ChexSystems must explain how they verified the dispute.
The FCRA gives you the right to know how the dispute was confirmed. Send another certified letter requesting validation of the disputed item. The validation should include the name, address and telephone number of the business or individual who verified the dispute as accurate in addition to your signature on any original documentation from the bank. Keep a good timeline and all return receipt cards from the post office. If ChexSystems cannot verify how they confirmed your dispute they must delete the item.
»Unverified Disputes: If ChexSystems does not respond to your dispute within 30 days from their receipt they must delete the item. You can confirm when ChexSystems received the dispute by checking the green return receipt card you get from the post office. No response means they could not confirm the item and it must then be removed. Send ChexSystems another certified letter demanding a deletion due to not responding in the time allotted by FCRA Rules.
»Dispute directly with the bank. If your ChexSystems dispute does not create the desired result, you have the right to dispute directly with the bank or credit union that reported you to ChexSystems. Furnishers of information to checking reporting companies are required to accept disputes from consumers. You can send your dispute to the address for the bank or credit union found in your consumer report or you can call customer service for the bank that reported the information about you to find out where to send the dispute.
Disputing directly with the banks may work in your favor in the case of older accounts. Banks and credit unions are under the same dispute time-constraint to respond within 30-days or delete the negative item. ChexSystems and your financial institution must research the dispute within 30 days. If they confirm that information is wrong or incomplete, they’re bound by federal law to correct it.
»Dispute with ChexSystems First. You should always dispute with ChexSystems before you take action with the bank. Once you dispute an item, ChexSystems has 30 days to complete the investigation. You might get lucky if the bank does not respond within the 30 day time frame and the dispute item is deleted. Also, by disputing with ChexSystems first, you create a paper trail in case you need it down the line for legal action. ChexSystems can only report “accurate” information according to the FCRA.
»Types of Inaccurate information to dispute.
Since FCRA Rules state you must “accurately” report all negative items, review your ChexSystems report for any inaccurate information you can use to get the item deleted.
- Date the bank reported you to ChexSystems
- Is the item being accurately reported to ChexSystems — Does your file list NSF activity, account abuse, fraud, overdrafts or negative balance.
- Outdated information. Is the reported information more than 5 years old. If so, request ChexSystems delete outdated records.
- Date the bank first notified you the account became negative. When did the bank close the account and report it to ChexSystems. This will help determine when the Statute of Limitations begins. Items can remain in ChexSystems up to 5 years.
- Are you the primary account holder, if not, have you signed a signature card for this account. Request the original copies of your signature card. If ChexSystems cannot provide you with the proof they must delete the item.
- Is ChexSystems reporting personal information such as a name, address and Social Security number accurately.
Any deviation from accurate reporting is a violation of the FCRA and the item must be removed. This also includes clerical errors. Look carefully at your report to find any errors to dispute.
If you are unsuccessful in getting an item removed after disputing with the ChexSystems you can attempt disputing directly with the bank. They are also held to the FCRA Rules when it comes to reporting negative information. And, if you are willing to settle, you should negotiate a pay for deletion. Get the agreement in writing before you send any settlement funds.
3. Bankruptcy can get you removed from ChexSystems
Consumers who have filed bankruptcy can request ChexSystems remove any records in ChexSystems. The bankruptcy does not have to be discharged in order to request removal from ChexSystems. Mail or fax ChexSystems a copy of your bankruptcy confirmation document and request they delete all negative items. Even if the negative items are fraud or account abuse, ChexSystems will remove them if you have filed bankruptcy.
4. Pay Small Balances and Get Removed
There may be only one item on your ChexSystems report and if this is the case, consider paying the bank directly and follow these steps:
- Pay the amount in full
- Get a proof of payment such as a receipt
- Complete a ChexSystems dispute form or mail a dispute letter
- Dispute on the factual basis of inaccurate reporting and no evidence of debt owed
- Demand a full deletion
Because the FCRA requires only accurate information be reported in consumer reports, once ChexSystems contacts the bank to verify accuracy of the outstanding debt, the bank will be unable to confirm the debt is unpaid.
ChexSystems will have to delete the item because the bank will be unable to provide verification or proof the item is unpaid. Your goal is a deletion, not to have the item updated as “Paid.” Without a full deletion, a paid item is still considered negative.
You want to challenge the accuracy of information reported in ChexSystems; and, once an item is paid directly to the bank, ChexSystems reporting that item is considered inaccurate.
5. Challenge ChexSystems Fraud Notations
Fraud notations in ChexSystems are very common but also very ambiguous. What type of fraud was committed by the customer, if any. Fraud seems to be a “blanket” notation used by financial institutions so they will not have to detail why a consumer was reported to ChexSystems.
A fraud notation is very serious but can be the easiest to dispute. Dispute the fraud notation and if ChexSystems verifies the notation as accurate, request specific documentation of the alleged fraud. More than likely, the bank will be unable to provide any documentation proving you committed fraud due to the vagueness of this notation.
You may have deposited a check someone gave to you for repayment of a loan and that check bounced. Now the bank accuses you of fraud. How is it determined you intended to fraud the bank when you deposited the check? Banks can rarely prove you purposely intended to commit fraud.
6. Take Legal Action
Hopefully you will not have to resort to legal action. However, if all efforts to successfully dispute an item have failed this may be the only course of action. Make sure you have created a good paper trail, with copies of all your letters along with the certified return receipts. Your legal action should include proof that you properly notified ChexSystems of the error and they did not correct make a correction.
Another way to clear your ChexSystems report is to make a plea directly to the bank for removal. Many consumers have been successful by just asking. This method works best if you pay or offer to pay the amount in question when requesting removal.
You should be able to show how their failure to correct the error has harmed you in that you are unable to open a checking account and subject to using expensive alternative financial services.
Once a small claims lawsuit is filed you will more than likely get the outcome you are looking for without even going to court. Lawsuits are costly and ChexSystems does not make money by hiring an attorney to litigate. They will probably try to settle and remove the item from your ChexSystems report. Familiarize yourself with FCRA Rules. Each violation of the FCRA is worth $1,000.
Negative ChexSystems records are removed after five years — if disputing ChexSystems does not work, wait it out.
A negative ChexSystems report does not necessarily prohibit you from opening a new checking account or finding bank accounts for bad credit.
Second chance banks design checking accounts for people with a negative ChexSystems file or with bad credit. These types of checking accounts may have monthly fees but give customers an opportunity to upgrade to regular free accounts after 6 to 12 months of handling your account well.
Second chance banks give you an opportunity to rebuild your financial history and become bankable again.
