ChexSystems is a credit reporting agency that has been in existence for many years.  ChexSystems offers data to banks (and gathers data from banks) on how a consumer has handled deposit accounts at banking institutions. The company today is managed by eFunds Corporation, a publicly traded company.

Unless you work at a bank or have been denied opening a bank account, you probably haven’t heard of ChexSystems. As a service to help banks limit their exposure to fraud and credit risk, ChexSystems maintains a list of individuals whose previous bank accounts have been “closed-for-cause.” These causes range from outright fraud, such as writing bad checks, to other causes that present a credit risk or potential for fraud. ChexSystem reports on such risk factors as:

• Account holders who report lost or stolen checks and have closed their account for this reason.

• Account holders who have had extended negative balances.

• The number of times a consumer has applied to open a bank account in the past 90 days.

These are flags for the potential for fraudulent activities such as opening and closing accounts for the purposes of writing bad checks. Some analysts also suggest that banks might use the list to weed out unprofitable banking customers such as individuals who keep low balances (which are less profitable for the bank.)

To be sure, Chexsystem helps banks combat the problem of fraud. However, innocent individuals who have not committed fraud, and may have only been guilty of inadvertently bouncing a check, or having a few overdrafts in a short period of time, can wind up essentially “blacklisted” from being able to open a bank account because they are on the ChexSystems list.

Banks decide based on their own policies and procedures when to close an individual’s account and report that fact to ChexSystems.

So, if you are having trouble getting a checking account, you do have alternatives.