eFunds is the parent company of Chexsystems. Chexsystems was developed to detect fraudulent activity and to help financial institutions manage and analyze risk, specifically for individual customers.



Basically, it keeps track of and then reports on your banking activities similar to what your credit report and score does for you in terms of measuring how you are as a credit risk and in paying bills on time. Chexsystems keeps a sharp eye out for suspicious banking activity, overdrafts, insufficient funds check cashing, or an inability to meet minimum balance account requirements.

In this way, Chexsystems provides two services. It verifies your checking activity and functions as a consumer credit reporting agency similar to TransUnion or Equifax. Just as you can ask for one credit report every year, you can also ask for a Chexsystems report once a year, also free of charge. This is because, like the credit reporting agencies, it is also covered by the Fair Credit Reporting Act.

This means that if you are a consumer, you can question any information Chexsystems contains, including the ability to dispute entries. Most banks and credit unions in the United States use Chexsystems. If there's any negative reporting on a particular client, that person may have trouble opening a checking account. Is Chexsystems fair? Some critics have objected to their reporting practices, saying that the system does not report fairly, and unlike credit bureaus with both positive and negative information, critics say that Chexsystems only contains negative information, so that this jeopardizes consumers' reputations who would otherwise be qualified to open checking accounts.

Because of this mounting criticism, several banks got together in 2000 and agreed that they would reconsider policies that affected checking account applications based on Chexsystems reports. There were some reforms introduced. Some of these reforms include ignoring entries more than three years old as long as they do not contain fraudulent activity. It also disregards Chexsystems entries that are more than one year old providing the consumer has settled the debt in question and it extends the time in which the consumer can repay the debt in question.

What information is provided in the Chexsystems report? A sample report shows us that it is indeed very thorough. The name and address of the person in question appear at the top of the report, along with an ID number and Social Security number. If you should ever write Chexsystems about a report, he you should refer to your social security number and ID number in your correspondence.

The first thing you read on the document is that Chexsystems will look into any information or entry that you believe is incorrect or inaccurate. You can send your inquiry to fax number 602-659-2197.

After this is the "Reported Information" box. Most of this information comes from financial institutions. It is recorded in Chexsystems for five years. If there is more than one reported transaction or piece of information, items are itemized. Each item details source of the reported information, and the individual in question being reported on, including Social Security number, driver's license number, as well as the type of report done, such as non-sufficient fund's report.

The next box reads, "Inquiries Initiated by Consumer Action." This covers transactions that you made yourself. It shows what applications you have had for a credit card, or applications you made from a financial institution or bank. This information stays on the report for up to three years.

The third section or box reports on "Inquiries not Initiated by Consumer Action". What this means simply is that other people have asked about you. These people could be your present creditors, pre-approval creditors or potential investors who are trying to assess you as a risk.

The next box says, "Retail Information," and this includes checks you have written to stores and other retailers that have been returned for nonsufficient funds. When a store gets a check that it can't cash because of nonsufficient funds, a company called "Shared Check Authorization Network" receives it and keeps a database of your fraudulent activity and checks that have been returned. In order to participate, including obtaining information for check authorization and verification, retailers must be SCAN members. Chexsystems uses SCAN, but it does not get involved in collecting returned checks.

If you've ordered any checks, this is also recorded in your Chexsystems report and it provides a history of your check orders. The next two boxes are validation activities for your driver's licence and social security number. Your driver's licence goes through two processes: validation and verification. Chexsystems validates your driver's licence by matching your licence format with the state-approved format; verification involves confirming your name and place of birth.

So before you write out a check, think of Chexsystems and make sure that you have enough money in the bank to cover the check, that it is your check and not someone else's, and that perhaps it's a better idea to pay for merchandise with cash or a credit card!