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ChexSystems, National Database of Bad Check Transactions, Profiled in WSJ

A company known as eFunds maintains a database called ChexSystems that contains bank customers who have been involved in checking account transactions that have resulted in charge-offs by its member banks. According to the report in the Wall Street Journal, ChexSystems is "a national
database to which 80% of bank branches in the country
subscribe. Once lodged in ChexSystems, you automatically
stay there for five years, whether your offense was bouncing
a check or two or committing serious fraud. The large
majority of banks using ChexSystems reject any
checking-account applicant they find in the database."

The article goes on to state that the majority of the seven million people who are listed in the database are of modest means (i.e. middle to low income) and are often rejected for new checking accounts or credit cards for a five year period.

We found the service offering that the WSJ speaks of on the E-funds Web Site. Looked at from the perspective of the retail bank trying to manage its risks, this looks like a really important tool. However, as is the case with every consumer credit reporting mechanism in existance, data quality must be kept high so that innocent people who make mistakes aren't hurt.

Finally, the thing that probably upsets a typical consumer most is that they often would not know that ChexSystems exists, or how it works, until they are already a part of the database.

For the record, eFunds is a subsidiary of Deluxe Corporation.

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