If you’ve been denied a checking or savings account at a bank or credit union, it is likely due to a negative listing on ChexSystems. ChexSystems is a consumer reporting agency that consists of a network of financial institutions that keep track of individuals who have imperfect banking records.
Items such as excessive overdrafts, insufficient funds (NSF), or bank accounts closed with money still owed are compiled in your ChexSystems record and reported to member institutions.
When you apply for a new bank account, the financial institution requests your history from ChexSystems. Banks and credit unions may deny your application based on any negative information it finds.
How long does it take to get out of ChexSystems?
Once reported, those negative items may remain on your ChexSystems report for up to five years. This can make 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 ChexSystems report and get back to being bankable.
How to Dispute Errors on Your ChexSystems Report
If you think the information contained in your ChexSystems report is inaccurate or even “questionable,” you have the right to dispute it. So, make sure to check for errors or any signs of identity theft.
Once you open a ChexSystems dispute, ChexSystems and the relevant bank must be able to prove its accuracy. Otherwise, ChexSystems must remove the negative information from your ChexSystems report.
However, just because 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 intended to be a reflection of your banking history, not your current situation.
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What Constitutes Acceptable Proof
ChexSystems can provide several forms of acceptable proof, including a copy of the canceled check or a copy of the original banking contract you signed when you opened the bank account. If they cannot provide proof, the relevant information must be removed from your report.
Still, the ChexSystems dispute process can be complicated if you don’t know what you’re doing. That’s why we’ve created a guide, along with dispute letter templates, to help you glide through the process as quickly and easily as possible.
You can use 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 ChexSystems removal 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
You are legally entitled to a free ChexSystems report every 12 months. You are also entitled to a free credit report anytime a bank or credit union has denied you banking services in the past 60 days due to information in ChexSystems.
So, if you haven’t already, obtain a free copy of your ChexSystems report from the ChexSystems website.
You can also request a credit report by calling their automated voice messaging system toll-free at (800) 428-9623.
If you prefer to contact ChexSystems by mail, you can write them at:
Chex Systems, Inc.
Attn: Consumer Relations
7805 Hudson Road, Suite 100
Woodbury, MN 55125
Once you have your ChexSystems report in hand, review the information carefully to see if you can find any inaccurate or questionable information listed.
Step 2: Submit a Dispute with ChexSystems
Once you have your ChexSystems report, reference the information you wish to challenge using our sample dispute letter, ChexSystems Dispute Letter 1.
You must submit your dispute online or by mail. If you choose to mail it, submit your dispute letter via certified mail with return receipt requested. Keep a copy on file for your records. This simple step provides proof of the date that your dispute was received.
Under the Fair Credit Reporting Act (FCRA), ChexSystems has to verify the negative mark within 30 days or delete it from your ChexSystems report.
You can submit your dispute to the same address:
Chex Systems, Inc.
Attn: Consumer Relations
7805 Hudson Road, Suite 100
Woodbury, MN 55125
Step 3: Follow-up On Your Claim
If you hear back from ChexSystems within the 30-day time frame with a generic confirmation of the negative item, you’ll need to request verification from the original bank as well as ChexSystems.
Send ChexSystems Dispute Letter 2 to request actual copies of documentation from ChexSystems supporting the accuracy of the negative item.
At the same time, send Dispute Letter 4 to the original bank that filed the information with ChexSystems, which adds the burden of responsibility to the bank.
Both dispute letters reference your rights as a consumer under the FCRA and the Fair Debt Collection Practices Act. Remember, you must send these letters via certified mail with return receipt requested, and you should also save copies for your files.
Step 4: Handling No Response from ChexSystems
If you DON’T hear back from ChexSystems within the 30-day time frame, send Dispute Letter 3 to ChexSystems. This gives a firm warning to delete the information since their lack of responsiveness violates the Fair Credit Reporting Act.
In this scenario, you should also send Dispute Letter 4 to the original bank, requesting they send proof of your alleged transgression.
If either ChexSystems or the bank can verify the information on your ChexSystems report, these steps may not remove the negative item from your ChexSystems report for more than a few days.
You may be able to open a checking account when the information is temporarily removed. However, you run the risk of later having your checking 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 checking account to a positive standing, there is one final option that may enable you to get out of ChexSystems. 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. So, as long as you sent the letters as instructed above, you should have the proof you need to file a lawsuit and win.
Step 1: Get Your ChexSystems Report After 30 Days
Request your ChexSystems report again at ChexSystems.com exactly 30 days after the bank receives your dispute letter.
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 rather than pursuing the lawsuit. Often, 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 filing fee for this, typically around $40. Remember, you are not disputing whether you owe the debt at this point.
You are only suing because the bank has failed to comply with federal law regarding fair credit reporting.
In most cases, the bank will settle, but you should win the suit even if they appear in court. This is because you have proof that they violated the FCRA by not complying with the regulations to place the notice on your ChexSystems record.
How to Fix Accurate Negative Items On Your ChexSystems Report
The tips above focus on getting errors removed from ChexSystems reports or having negative items removed based on technicalities throughout the filing process.
It is still possible to rectify a ChexSystems report, even if everything is accurate and both ChexSystems and the bank or credit union responded to your proof requests exactly as they should have.
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.
Negotiating With Banks and Credit Unions
When negotiating the payoff process, ask the bank or credit union 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. Meanwhile, take a look at our listing of banks and credit unions that don’t use ChexSystems. These banks will allow you to open a bank account.
There’s a healthy mix of checking and savings accounts on the list, with plenty of options to choose from. So, even if you are in the ChexSystems database for the next few years, you can still have a bank account and access to the financial tools you need to manage your money.