Chexsystems is a service offered by the company eFunds that does double duty, and they offer a verification for checking banking account information on an individual as well as consumer credit reporting. This company is similar to the major credit reporting agencies for consumers, which includes Transunion, Experian, and Equifax, but in addition to credit reports on consumers the company also offers data that identifies how well the consumer has managed bank accounts at financial institutions as well. The days when a consumer could run up large overdrafts and then just open an account at another bank are long gone.
A report from the company will normally include information on any banking irregularities for the consumer in the past. These irregularities can include suspicious activity on an account, overdrafts on checks drawn on an account, the use or deposit of fraudulent checks, and any account balances that are not satisfied.
4 out of 5 banks, credit unions, and other financial institutions use Chexsystems to verify potential new account holders. The report will usually go back for 5 years, and in most cases any negative activity within 5 years will prevent an individual from opening an account at any financial institution that uses the verification service. The company was classified as a consumer reporting agency in 1990, and this means that consumers are covered under the Fair Credit Reporting Act.
Consumers have the right to dispute any information on the report that is incomplete or inaccurate, and they also have the right to request a free report from the company once a year to verify that the report only contains accurate and up to date information. Financial institutions have a need to verify potential customers who have used dubious or poor handling of accounts in the past, including poor financial management resulting in overdrafts or fraudulent activity.
Chexsystems uses information provided by financial institutions including banks to verify the account services and negative account activities that a consumer has. Consumers who have had numerous overdrafts or have had accounts closed because of fraudulent activity or non sufficient funds are high risks for banks, and this service can help minimize the risks faced by screening potential customers.
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