Have a Bank Account? ChexSystems is Tracking Your Every Move

David Chang of Chang and Carlin, LLP explores the impact on American banking of ChexSystems, a massive tracking entity exists that will monitor and evaluate your every move if you have a bank account.

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“We frequently have clients who go through the entire bankruptcy process only to discover that they still can not open a bank account due to ChexSystems reporting errors. Luckily, there are a number of approaches available..." -David Chang

Chicago, Illinois (PRWEB) September 17, 2012

Most people who have a bank account are somewhat aware that their actions are monitored when they enter a bank. Security cameras are now omnipresent in everyday life, and this is especially true near financial institutions. However, very few realize that a massive tracking entity exists that will monitor and evaluate your every move if you have a bank account.

This entity is ChexSystems, which receives information from a network of contributing financial institutions on mishandled checking and savings accounts. According to the company website, ChexSystems shares this information among member institutions to help them assess the risk of opening new accounts.

This extra layer of protection aids banks in the network by warning them about potentially risky consumers who may leave a bank with charges like unpaid outstanding balances and overdraft fees. It is also a useful tool to assist banks in thwarting fraud and identity theft.

Bankrate notes a few key pieces of information about ChexSystems:

1. A negative ChexSystems report stays in the database for five years and can doom your chance of getting a checking account for that period.
2. Financial institutions lose billions of dollars every year because of check fraud and abuse, which is why 80 percent of U.S. banks and credit unions belong to the ChexSystems network.
3. In reality, bouncing a check or two isn't likely to earn you a file in ChexSystems, but if your account is closed because it's overdrawn, you'll most likely wind up there.

In a recent CNN Money article Nessa Feddis, senior counsel at the American Bankers Association, said the point of ChexSystems is to warn banks about risky customers and bar certain applicants from getting accounts they can't properly manage. "It makes sense to warn other institutions of people who have caused a loss in the past because they are more likely to cause a loss than someone who hasn't done so," said Feddis.                

Defending the Consumer
This system is certainly of great use to banks, but individuals who have checking accounts may experience the other side of the coin.

David Chang, a partner and bankruptcy attorney at Chang and Carlin, LLP, notes that, “We frequently have clients who go through the entire bankruptcy process only to discover that they still can not open a bank account due to ChexSystems reporting errors. Luckily, there are a number of approaches available which will alleviate the situation, with filing a lawsuit being the last resort. Still, the shock of discovering an additional obstacle can be very frustrating to people who have just faced the rigors of bankruptcy.”

Consumer reporting agencies that track your every move, like ChexSystems and other credit bureaus, are still governed by the Fair Credit Reporting Act (FCRA) and other laws. This means that ChexSystems can still be sued under the Act for improper reporting. Additionally, if ChexSystems fails to follow the dispute mechanism procedures on a disputed trade item in its report, it can be sued in Federal Court.

Another interesting aspect of ChexSystems is how easily they have slipped under the radar of most Americans. According to MSN Money, ChexSystems' opacity is one of its most frustrating features. Consumer Affairs compared the difficulty of researching the company to "oil-wrestling a contortionist in a frictionless body stocking."

It is telling that few consumers who have a bank account are even aware of the company that is responsible for tracking your every move. While the seeming lack of transparency does raise questions about the privacy of sensitive financial information, the good news is that increased supervision is on the way, and legal action is currently the best way to protect oneself from costly reporting errors.


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