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Janice France-Pettit: ChexSystem monitors how you handle your bank account

Union Bank

Posted: May 5, 2012 2:00 a.m.
Updated: May 5, 2012 2:00 a.m.
 


Most consumers know that before a lender decides to extend them a loan or a line of credit, they will investigate their credit history, so it is important to maintain a favorable credit score. 

While your credit history is a critical component of your personal finances, your banking track record is also important. 

Just as a lender will assess your creditworthiness before extending a loan, most financial institutions will assess your risk level before opening a checking or deposit account. 

To help lenders assess this risk, they may utilize information gathered from an agency that helps them identify account applicants who may have a history of mishandling their bank accounts. 

There are three major specialty agencies that report on check writing history — ChexSystem, Shared Check Authorization Network (SCAN), and TeleCheck.

ChexSystem is a nationwide specialty consumer reporting agency that collects and maintains information from member financial institutions such as banks and credit unions. 

If a bank closes your checking account because of insufficient funds, or believes you have handled your account improperly, it may file a report with ChexSystems so other banks have access to this information when you apply for new accounts.
SCAN and Telecheck are check-verification services that provide check authorization and verification to its member retailers.

These companies maintain a database which contains a comprehensive list of people who either wrote a bad check at a retail
location, paid a bill with a check that was returned for insufficient funds or for fraudulent activity. 

Like credit bureaus, specialty reporting agencies do not make decisions about whether to accept your check, or allow you to open an account. But if these agencies indicate you have a history of writing bad checks, you could find that some businesses refuse to accept your personal checks, even if you do have the funds in the bank to cover it, and some banks may not allow you to open a new account.

All three reporting agencies are governed by the federal Fair Credit Reporting Act, consumer protection legislation that was designed to ensure that the gathering and sharing of consumer information is done accurately, fairly and with respect for the consumer’s right to privacy. 

Consumers are entitled to one free copy of their reports each year by contacting http://bit.ly/IKrHHPor by calling 1-800-428-9623. 

It may be prudent to review your ChexSystem report annually, especially if you have been a victim of identity fraud or if someone has fraudulently cashed checks against your account.

Bouncing a check is a serious matter.  Beyond fees and penalties, the negative information stays on your record between five and
seven years, depending on the reporting agency, even if the account was paid in full.  And if the check is not made good quickly, the payee can take legal action, and it can become a criminal matter.

To avoid bouncing a check, always keep close track of your account balance and log debit card transactions and subtract them from your balance immediately. 

Consider applying for overdraft protection, or talk to your banker about establishing a line of credit or savings account to be used to fund an overdraft. 

Even with the best intentions, sometimes mistakes can happen, so if you do bounce a check, contact the bank and the merchant and make good on the check right away. 

The column is co-authored by Janice France-Pettit and Maria Bautista.  Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, San Fernando Valley and Antelope Valley regions. Her column reflects her own opinion and not necessarily that of The Signal. The foregoing article is intended to provide general information about ChexSystem and other financial reporting agencies and is not considered financial or tax advice from Union Bank. Please consult your financial or tax advisor. Visit www.unionbank.com for more information.

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