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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Account Application Rejection Due to ChexSystems' FraudFinder


Account Application Rejection Due to ChexSystems' FraudFinder

A reader emailed me about problems he had when he was trying to open a new deposit account. The bank rejected his application not because of the basic ChexSystems report, but because of potential issues identified by FraudFinder.

This was the first time I've heard of FraudFinder. I did some research into FraudFinder, and I still don't know all the details. According this page at FIS, FraudFinder is provided by ChexSystems and provides financial institutions a tool to protect themselves from "identity manipulation and fraud." It appears to be one of many products that banks can purchase from ChexSystems.

You have probably heard of ChexSystems. We did a review of ChexSystems back in 2010. ChexSystems operates as a subsidiary of Fidelity National Information Services, Inc (FIS). According to the ChexSystems website:

Chex Systems, Inc. provides account verification services to its financial institution members to aid them in identifying account applicants who may have a history of account mishandling (for example, people whose accounts were overdrawn and then closed by them or their bank).

Ideally, you only have to worry about ChexSystems if you have a history of mishandling your bank accounts. However, responsible savers have been denied bank accounts due to mistakes in ChexSystems, or as in the case of this reader, a problem with the FraudFinder product.

ChexSystems is a consumer-reporting agency governed by the federal Fair Credit Reporting Act (FCRA). Consequently, consumers have some rights. One of those is the right to get a free copy of your report every 12 months. The Consumers Financial Protection Bureau (CFPB) recently reported this, and listed 40 of these specialty consumer reporting companies that must give you an easy way to get a free copy of your report every 12 months. ChexSystems is one of those 40, and you can request your free report at ConsumerDebit.com. The report is also free to anyone if ordered within 60 days of a bank account denial.

As the reader found out, your ChexSystems report may not be good enough to find out why your bank account application was rejected. Below are excerpts of the email that he sent me:

First, ChexSystems was reporting our address as non-residential. We live in an apartment community that was recently built on a site that was previously a commercial zoned property. However, the redevelopment occurred several years ago and we have been at the same address for over 2 years.
[...]
there were several comments listed under their FraudFinder detail. One comment listed a business that I later discovered used to be at our address when it was a commercial property.
[...]
Another item that was showing up under their FraudFinder product was that my social security number was issued at age 30, which apparently they feel was cause for concern. I immigrated to the US at age 30 so that is when I first obtained a SS #. So while they are reporting is correct it has a perfectly valid explanation.

Due to this information on the report the bank refused to open the account or add me as joint owner. The bank also provided us with a copy of the entire report. At first we suspected some sort of identity theft. That day we both ordered copies of our credit reports. Fortunately there were no problems. We also ordered our ChexSystems consumer reports because we suspected that we would not receive the same information that our bank was getting.

As we thought, when we received our reports they showed none of the potentially negative information they were reporting under their FraudFinder product.
[...]
I then sent them a letter to address the problems and ask them to either substantiate the information or remove it. Their reply was that they had not provided this information in the form of a report but rather it is a service they provide. The response didn’t say much else other than that it was the bank who made incorrect assumptions based on the information they provided. Again they provided a copy of my report which does not reflect any of this information that I am disputing.

I sent them a follow up letter, again asking them to either substantiate the information they are reporting or stop reporting it under my name. I did receive a response and they did say that they have now verified and updated our address as a residential address. They did not say if they would stop reporting that there was suspicious activity associated with the address. There probably isn’t much I can do about the social security number issue as technically it is correct. I am considering put a statement on my report as to why it was only issued when I was 30. I am also considering writing to the FTC and our state attorney general because to me it seems very difficult for the consumer to be able to get all the information is being reported about them.

I would like to thank the reader for sharing his experience. It shows how easy it is for banks to find reasons to reject your account application. It also shows that it can be difficult to find out how to get the problems resolved to avoid future rejections.

Have your bank account applications been rejected due to ChexSystems, FraudFinder or related checks? Please share your experiences in the comments.

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Comments
me1004
me1004   |     |   Comment #1
This strikes me as alarming. ChexSystems seems to think it has devised a way to circumvent the regulations on credit reports. It is telling the reader:

"Their reply was that they had not provided this information in the form of a report but rather it is a service they provide."

So, ChexSystems is saying that simply because it doesn't label it as a credit report, then it is not subject to any of the regulations of credit reports, even though that is the very type of information it contains! It is completely for credit considerations! Nothing but word games -- how devious. Well, I say a rose by any other name is still a rose.

Under federal law, a credit report is not allowed to contain negative information that is more than 10 years old. (Some states make that shorter. For instance, California limits the negative information to eight years.) But here, under the negative term of "FraudFinder," decidedly labeling this as negative information, ChexSystems is knowingly disseminating such information and claims it is not a "credit report." For instance, while this reader did not give his age, I suspect that Social Security number labeled as suspicious as fraud -- decidedly being reported as negative -- was issued more than 10 years ago. 

I find this alarming. I am wondering whether it would even pass legal muster -- although I have never read the pertinent laws on credit or information reporting. But it sure seems to me that this should be subject to all the same laws as any other credit report -- this is directly aimed at your credit worthiness. 
Anonymous
Anonymous   |     |   Comment #2
ChexSystems wants to be relevant without assumong any resposibilities, how convinient!
Anonymous
Anonymous   |     |   Comment #5
"Their reply was that they had not provided this information in the form of a report but rather it is a service they provide." This is alarming as ChexSystems IS reporting your credit and their FraudFinder is giving banks indication of a fraud, but they are not under regulation as credit report agency.

 
Manias
Manias   |     |   Comment #6
My application for a joint checking account at Columbia Bank (for the Kindle Fire promotion) was rejected, but my wife was approved.  It was somewhat difficult to find out why I was rejected.  It turned out that ChexSys had a record of another person using my social security number. (I think the other person had entered it incorrectly on a bank account application.  I found no evidence of identity theft.)  To clear this up, I had to FAX them my social security card to prove that the number is mine.  (We subsequently closed my wife's account after receiving the Kindle Fire.)