If you’ve been denied a checking or savings account at a bank, it is likely due to a negative listing on ChexSystems. ChexSystems is a network made up of financial institutions that keep track of individuals who have imperfect banking records. Items such as excessive overdrafts, insufficient funds (NSF,) or accounts closed with money still owed are compiled in your ChexSystems file and reported to member institutions.
When you go to apply for any type of bank account, the financial institution requests your history from ChexSystems and deny your application based on any negative information it finds. Once reported, those negative items may remain on your ChexSystems report for up to five years, making it difficult for you to open an account with most financial institutions. Luckily, there are ways to get out of ChexSystems. Follow this step-by-step guide to dispute your report and get back to being bankable.
How to Dispute Errors on Your ChexSystems Report
If you think your ChexSystems report might be inaccurate, it is possible to dispute the information in your file. Once you open a dispute, ChexSystems and the relevant bank must be able to prove its accuracy, otherwise the negative information must be removed. However, the fact that you paid all the money owed to the bank on an account does not mean the bank or ChexSystems must remove the negative mark. The report is meant to be a reflection of your banking history, not your current situation.
What Constitutes Acceptable Proof
Acceptable proof of a negative item can take many forms, including a copy of the canceled check or a copy of the original banking contract you signed when you opened the account. Without these records the relevant information must be removed as unproven and the negative items must be removed from your ChexSystems report.
Still, the dispute process can be complex if you don’t know what you’re doing. That’s why we’ve created a step-by-step guide, along with letter templates, to help you glide through the process as quickly and easily as possible. You can adapt the information provided to meet your personal situation, since no financial problem has a one-size-fits-all solution. If you need legal advice, contact an attorney with specific experience in this area.
Once you’ve started the dispute process, you can potentially have erroneous or unproven information permanently removed from your ChexSystems report. From there, you should be able to open a bank account again without any problems.
Step 1: Get Your ChexSystems Report
If you haven’t done so already, obtain a copy of your free ChexSystems report from the ChexSystems website, ConsumerDebit.com. You are legally entitled to a free report annually, or anytime if a bank has refused to open an account for you in the past 60 days because of information in ChexSystems. Once you have your report in hand, review the information carefully to see if there is any inaccurate information listed.
Step 2: Open a Dispute with ChexSystems
Once you have your report, reference the information that you wish to challenge using our sample dispute letter Chexsystem Dispute Letter 1. You must send your dispute letter via certified mail with return receipt requested and keep a copy on file for your own records. This simple step provides proof of the date that your dispute was received, which can then be used to have your information removed under the Fair Credit Reporting Act if ChexSystems does not act on your request in a timely fashion. By law, ChexSystems has 30 days to provide verification of the negative mark or delete it from your report.
Step 3: Follow-up On Your Claim
If you hear back from ChexSystems within the 30-day time frame with simply a generic confirmation of the negative item, you’ll need to request verification from the original bank as well as ChexSystems. Send ChexSystems Verification Letter 2 to request actual copies of documentation from ChexSystems supporting the accuracy of the negative item.
At the same time, send Letter 4 to the original bank that filed the information with ChexSystems, which adds the burden of responsibility to the bank. Both letters reference your rights as a consumer under the FCRA and the Fair Debt Collection Practices Act. Remember, these letters must be sent certified mail with return receipt requested and you should also save copies for your own files.
Step 4: Handling No Response from ChexSystems
If you DON’T hear back from ChexSystems within the 30 day time frame, send Letter 3 to ChexSystems. This gives a firm warning to delete the information since their lack of responsiveness is in violation of the FCRA. In this scenario you should also send Letter 4 to the original bank requesting they send proof of your alleged transgression. Again, all letters must be sent via certified mail with return receipt requested so you can confirm their delivery.
If the information on your ChexSystems report is indeed accurate and can be verified by either ChexSystems or the original bank, these steps may not remove the negative item from your report for more than a few days. You may be able to open a checking account during the time when the information is removed, but you run the risk of later having your account frozen if the bank later performs a ChexSystems sweep of all existing accounts. This isn’t unheard of and may not be worth the additional risk of temporarily losing access to your funds.
One Final Option
Even if the bank does verify that you failed to bring your account to a positive standing or that you still owe money on your account, there is one final option that may enable you to get out of ChexSystems for good. The bank is required by law to report any uniformly disputed information to ChexSystems. If they do not, they are in violation of the FCRA and you can sue to have the information removed. As long as you sent the letters via certified mail with return receipt requested, you should have the proof you need to file suit and win.
Step 1: Get Your Report After 30 Days
Request your ChexSystems report again at ConsumerDebit.com exactly 30 days after your verification letter is received by the bank. Your updated ChexSystems report should have a note stating, “Consumer disputes as per FCRA” or something similar under the disputed account record. If there is no note, the bank has broken the law and you are within your rights to file suit.
Step 2: Mail a Letter Stating Your Intent to Sue
Send a letter to the bank letting them know that you intend to sue within 30 days due to their failure to comply with the FCRA. Give them the option to delete all records of the debt and remove you from ChexSystems in order for you to drop the suit. In many cases this simple step is all that is required to get the bank to remove the negative information so they can avoid being sued.
Step 3: Handling No Response
If the bank does not respond, you’ll need to take them to small claims court. There’s a low filing fee for this, typically around $40. Remember, you are not disputing whether or not you owe the debt at this point. You are only suing based on the fact that the bank has failed to comply with federal law regarding fair credit reporting. In most cases the bank will settle, but even if they do appear in court, you should win the suit because you have proof that they violated the FCRA by not complying with the regulations to place the notice on your ChexSystems file.
How to Fix Accurate Negative Items On Your ChexSystems Report
The tips above focus on getting errors removed from your ChexSystems report, or having negative items removed based on technicalities throughout the filing process. But even if everything is accurate and both ChexSystems and the bank responded to your requests for proof exactly as they should have, you can still work on rectifying your report. If you owe money to any ChexSystems member institutions, do your best to get those paid off. You can even negotiate to pay less than what you owe.
When negotiating the payoff process, ask the creditor to update the information in ChexSystems indicating that the debt has been paid. As always, be sure to keep copies of all the paperwork documenting the payoff.
As a last resort, remember that patience is key. All negative items on ChexSystems typically go away after five years. In the meantime, check out our listing of banks and credit unions that approve account holders without consulting ChexSystems. There’s a healthy mix of both checking and savings accounts, with plenty of options to choose from. Even if you do continue on with a ChexSystems file for the next few years, you can still access the financial tools you need to manage your money.