Chexsystems is an agency that helps prevent fraud within the banking industry by providing an account verification service. This service is used by most banks in USA, and a majority of credit unions as well. eFunds is the company behind the credit reporting agency, and there have been a number of complaints concerning whether the agency and company engage in unfair reporting practices. Most of the other agencies that perform credit rating activities will report histories of both types, positive and negative.
This is not the case with the agency operated by eFund, which only includes reports that have negative information. There is also not a risk analysis score provided by the agency. This type of score, the FICO score is one example, is used by financial institutions to evaluate risks in a consistent manner.
The reporting criteria for Chexsystems is not consistent among all of the financial institutions that use the service. Negative items were reported every time by some banks, some institutions only reported negative activity after an excessive time or only in certain cases, and some banks did not report most activity that other banks considered negative and reported promptly. A number of banks only use the service as an initial guide, and then frequently override the service denial if extenuating circumstances are present. Whether or not there are unfair reporting practices in play depends on who is asked.
A few consumers have found themselves banned from opening a new account after decades of exceptional account management just because of one or two mistakes or math errors. This is why many banks look at other factors in addition to the account verification information provided. The time as an account holder, the reasons for the negative activity, and whether any unpaid fees and costs are paid will all play a role in whether a consumer can open an account with a specific bank or financial institution.
Some advocates point out that Chexsystems can create barriers for individuals who are poor or on the lower end of the income spectrum. These individuals have little discretionary income so even small fees can be difficult to pay. This criticism has caused some banks to limit the types of activity reported, and to increase the minimum amount required for a report to be sent concerning the consumer.
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