Big, Idiot Brother Is Watching You
Now that Y2K bugs have pretty much gone the way of the bogey man, I have something real for you to fear: ChexSystems.
You can be a community pillar, or something like that, pay all your taxes, maintain a checking account with the same bank for over 12 years without bouncing a check, and find yourself unable to open a new checking account because of a ChexSystems report.
ChexSystems is a bad-check reporting agency on which 80 percent of banks nationwide have come to rely, to determine whether to open a new account with a customer. Banks are not interested in doing their own research on potential new clients. One negative report with ChexSystems is enough cause to refuse an account.
I admit it. I panicked. The same computer gurus who are now laughing contemptuously and saying, "You fell for that?" were, around December, telling me that Y2K was very real. "If I HAD any money in the bank, I'd take it out," was the counsel of my young computer geek friends.
So around the end of December, I went to the bank where I've kept an account for years. I withdrew several thousand in cash, with the idea that I'd open a second checking account at a competing bank, hedging my bets against this Y2K thing. If one bank crashed, maybe I'd still have some money at the other was my thinking here.
But the second bank refused to open an account for me because ChexSystems reported some kind of bad faith checking on April 27, 1999 on a bank in Chicago. Just out of curiosity, I contacted the Chicago bank, and they said they couldn't find anything on me anywhere in their records.
This didn't surprise me since, on April 27, I was stuck in Chatham County, Georgia, where I have been stuck for roughly 12 years. Just in case I'd forgotten some exciting, bad-check writing trip to Chicago, I went through my old check stubs. Just as I thought. I wrote several checks that week, on my normal account, one to my local Publix, another to Savannah Electric and, of course, my monthly house payment. This other Lynn Hamilton who is kiting checks on the windy city's magnificent mile clearly has a much more glamorous life than I do.
It's 2000; Big Brother is definitely watching. What no one predicted was that He'd be such an idiot.
I Am Not Alone
It's hard to find companionship when you've got a credit blemish. No one really believes I didn't write a bad check on a Chicago bank. I don't want to believe it myself. I keep having this fantasy of eating all the croissants I REALLY want at Via de France, then heading on over to Neiman Marcus to buy a pink hat with an white ostrich feather on insufficient funds. If I have bad credit, why haven't I been living better?
So I did what all the lonely people do: I went online. You're never alone in the internet community. There are people just like me, equally bewildered by their ChexSystems reports. A very few are in my same "Whaddup? But I wasn't there, and the bank says they don't know" category. Most "Chexvictims" admit to having mismanaged their accounts in some (usually minor) way. Most are accustomed to paying their bills, and many had no idea that they owed money. ChexSystems makes no attempt to notify people that they've had a report filed on them.
Angelo Maimone, for instance, made a stab at opening a checking account eight years ago when he was a raw college student. The banker opening his account wanted him to come back with his social security card, but Maimone decided he didn't want the account after all, so he didn't return. Now every time he tries to open a personal checking account, ChexSystems reports that someone tried to fraudulently open an account in his name.
Shavotnae Goldsby, who lives in California, cashed a check for $600 for a friend. It bounced and Bank of America closed her account. She paid off the debt with a check and wrote "Cashing this check is an agreement that Bank of America will not report anything to any credit agencies." When she asked why she had been reported to ChexSystems, despite having paid her debt in full, she was told that ChexSystems isn't a credit agency.
A woman who asked not to be named moved back to Minneapolis after living in Atlanta for a year. She forgot to record a couple of check transactions, and Wachovia of Georgia, where she had kept an account, reported her to ChexSystems. She paid the money owed, thinking that would resolve the situation. But two years later, she was unable to open a checking account. According to ChexSystems, she still owed $2.59.
To be honest, I'm not that worried about any of these people. They know how to advocate for themselves, how to raise their voices in person and in writing, how to find the information they need on the internet. They are clever and verbal and will always find a way out of difficulties.
The people I'm worried about right now are the ones who didn't post a tirade on the internet -- people who don't have the money for a computer, who don't know how to use the internet to find information and advice.
People who make $8 or less an hour, who are struggling to pay the bills, but do pay them, who live from week to week, who don't have any assets other than that precious margin of a few extra dollars in the bank. These people are easy targets of ChexSystems. Even if their checking records are nearly flawless in spite of their hardships, banks can use a ChexSystems report of a $10 bounced to check to exclude them from banking privileges. And banks have every motive to exclude these customers, because that's not where the banks make their money.
"Banks don't want a no-frills checking account customer whose average balance is less than $1,000 and who pays his low interest credit card debt in full each month. Unless he's paying off a loan on a Lamborghini or a mortgage on a mansion, he'll be treated like an unwelcome poor relation," writes Lynda Edwards of bankrate.com.
ChexSystems identifies people who have had trouble paying small debts because of their small income and enables banks to exclude these low-profit customers along with habitual fraudulent check writers.
"We believe that ChexSystems is allowing the banks to abuse its system. Banks are using it not just for reducing risk, but also as a tool to eliminate the bottom tier of consumers -- those who maintain low account balances," says the ChexSystemsBites group, identified as a group of consumer advocate volunteers.
It gets worse. Banks are now closing accounts of customers in good standing based on ChexSystems reports originating from OTHER banks.
"Now, a number of banks are using ChexSystems to check out their EXISTING customers, who face account closure if they are on the ChexSystems blacklist -- no matter how large their current balances, or how satisfactory the present banking relationship is to both depositor and banker," writes A. Engler Anderson of Brookline, Massachusetts.
Life without a checking account isn't a party. Here are a few ways to avoid or escape the ChexSystems matrix:
* If you're going to write a bad check, make sure it's a big sum. The size of your default makes it easier to get clear of a foul report. Here's how it works: ChexSystems will not remove you from their bad-faith records just because you pay in full everything you owe. The bank you repaid must request your removal from ChexSystems records. The bank is under no legal obligation to have you removed, even if you make good on ALL your bad checks as well as the handling fees, etc, with which banks pad their coffers at the expense of those who are already struggling to keep head above water. If all you owe is $20, the bank may very well leave you on ChexSystems records for the full five years, just out of malice, whether you pay up or not.
If, on the other hand, you owe $800, your creditor will be eager to make a deal with you to get its hands on that money. You have some bargaining power. You can stipulate that, upon payment of that sum, your name be removed from ChexSystems. You must get your creditor to send you a fax or e-mail, agreeing to these terms, before you pay up. Your fax or e-mail message is your legal proof that they cut this deal, and you can sue them if they don't comply. Alternatively, get one of the Vice Presidents of the company you owe to sign a document in person.
* You can write to ChexSystems and dispute their report, but in my experience all you will get is a form letter with no reference to your specific case. The form letter promises to follow up on your dispute, but that doesn't necessarily happen, either. ChexSystems still hasn't responded to the bill I sent them for $3000 in personal and professional damages.
* It can be VERY difficult to locate a telephone number for ChexSystems, so don't lose the one I'm about to give you. The bank that turns you down for an account won't give you the number. The company is located in Dallas, Texas, but it is not listed under ChexSystems in the telephone directory in that city. Dial (800) 513-7125. After opting for the language of your choice, press 5 for customer service. This may produce a real human.
* When you are moving, make SURE to close out your checking account properly. For most people, this means not closing the account until you are quite certain that all checks you wrote on it have cleared. This can take months. Then you MUST CLOSE the account, or the bank will keep charging you service fees. If they can't reach you with a bill, they will report you to ChexSystems, and you may be plunged into what the internet lovingly calls "ChexSystems hell" for five years, over a $20 debt.
* If you don't fall into the category of people who are just plain unprofitable to the bank, you have a much better chance to buy your way out of the problem. Open a savings account with several thousand dollars, then ask for a checking account, and see if those troubles don't roll away. Same goes if you have a profitable business. Angelo Maimone is a ChexSystems target, but as his web design company is worth half a million, the bank where he does business will open a checking account for him after a very short probation period. Unfortunately, this is not an automatic way around the problem. Banks have the legal right to refuse ANY kind of account -- savings, certificate of deposit, retirement -- based on an unfavorable ChexSystems report. But, in general, the more money you throw the bank's way, the more likely it is to turn a blind eye on the ChexSystems report.
* Find a bank that doesn't use ChexSystems. The ChexSystemsBites website at members.tripod.com/~CHEXSYSTEMSBITES/index.html provides a list. Another site, www.geocities.com/chexsystems, also provides useful information. Many people have found refuge in internet banking accounts, though they have an extended period between deposit and availability of funds that some will find difficult to manage. Whatever you do, DON'T just keep trying one bank after another randomly, in the hope that one will overlook the ChexSystems report or won't get wind of it. Three requests for a ChexSystems report within 90 days goes down in your ChexSystems file as another blotch, carrying the same weight as an banking account that was closed for cause.
* Married people can often piggy back on their spouses' checking accounts. You could also try mom and dad.
* If you're paying on a hefty home loan, the credit union that holds your mortgage may be willing to open a checking account for you.
* If ChexSystems is preventing you from conducting your finances in an efficient manner, you may not want to support them with your purchases. Check out the name of the company that prints your checks. Deluxe Checks, Current Checks, Checks Unlimited and Designer Checks are owned by the same company which owns ChexSystems. You may decide that you want to purchase your checks from another company.
* If ChexSystems issues a totally bogus report on you, PLEASE report it to the Comptroller of the Currency and the Federal Reserve Board. The Comptroller can be reached by phone at 1-800-613-6743 or e-mailed at Customer.Assistance@occ.treas.gov. You can fill out a Federal Reserve complaint online at the reserve's website, www.bog.frb.fed.us/pubs/complaints/. Please also report the bank that refused you an account, because without bank complicity, ChexSystems would be unable to operate as it does. Attempts at class action suits against ChexSystems have fallen on deaf legal ears. Lawyers say the damages vary too much from one victim to another.