Freezing of accounts is a serious issue and some consumers are neither aware of the circumstances that could result in this action, nor the involvement of Chexsystems in it. Well, as a consumer, you need to be informed of the process that leads up to the actual freezing of the account so you can tackle it better.

Some other Consumer Reporting Agencies (CRA)  provide reports on both the positive and negative aspect of your financial status, but with Chexsystems, the data provided is only on the negative. It is with this report that most banks make a decision on a consumers financial stability and may deny opening of accounts and other financial services based on the negatives.

How does Chexsystems relate with freezing my Accounts?

Chexsystems is a data compilation service dealing only with negative financial issues a consumer may have over the span of 5 years typically. It compiles this database into reports and alerts the banks on updates on your accounts. This now sets off the banks to pay attention and sort out the data  it provides, using it to make an informed decision about your financial capability, obligations and performance.

Can Chexsystems directly freeze my account?

The answer is No. Its jurisdiction does not cover taking action on a consumer’s account, it can only provide data in report form and then the banks make decisions about that consumer.

Is Chexsystems important?

Yes, it is. Most banks in the US rely heavily on the data it provides. ‘More than 80% of banks and credit unions use consumer reports from Chexsystems and other agencies to help them decide about bank applicants’ says Nerdwallet . Hence, because banks use this report, consumers need to pay more attention to their standing with Chexsystems.

What data in Chexsystems report can cause the freezing of a consumer’s account?

Any negative financial data in a consumer’s account is instantly placed on Chexsystems radar. Examples are:

1. Suspected Fraud or Identity Theft: When a consumer’s account is suspected of fraudulent activities or if a consumer bcomes aware of an identity theft situation, the consumer may decide to initiate security lockdown and this will be captured by the Chexsystems.

2. Bounced Checks and Overdrafts: An account that has activities of bounced checks and overdrafts that are not repaid within the stipulated period can lead to freezing of the said account.  

3. Accounts frozen for cause (fraud or bad checks): Consumers accounts that have a history of bad checks within a short period catches the attention of the Chexsystems, and the banks, acting on this report, may decide to freeze the account to better rectify,understand and monitor that account.

4. Abuse on debit cards or ATM: When a consumer’s account debit card has a history of misuse, it pops up on Chexystems radar and this may cause the bank to freeze your account, sometimes so you can come in person and they confirm that it really is the consumer and not someone else using the account.

5. Excessive loss of Checks or debit cards: When a consumer is in constant need of a new debit card or can’t find checks, it causes suspicion and banKS may freeze that account to flush the person out.

From the above examples, one can see that while the use of Chexsystems may seem like a way to poke holes at a consumer’s financial inadequacy, the same report is also used to protect the interest of the consumer and help them monitor their financial standing.

How do I access Chexsystems report?

Chexsystems reports are designed in such a way that the consumers have the right to retrieve a free Chexsystems report annually and dispute untrue negative information provided. Its governing Act,  the Fair Credit Reporting Act (FCRA)  aims to ‘promote the accuracy, fairness, and privacy of information in the files of the consumer reporting agencies’.

What should consumers do when their account is frozen?

At this point, all the information provided earlier comes together.

1. Get that Chexsystems report: Consumers need to know what data is contained in their Chexsytems file. Apply for the free annual report at  consumer disclosure report.  

2. Dispute any discrepancies found in the report as it could be responsible for the freezing of the consumers account.

3. If the data contained is true, go over to any physical bank office closest and discuss how to work or pay off any unpaid overdrafts or other financial obligations.

4. When the obligations are settled, ask for a receipt and request creditors to file and update with Chexsystems.This will help them see that even though you had financial issues, they were cleared off. This is important for future account opening or diagnosis by the banks.

5. Get a Second Chance account. This gives you somewhere to park your money while waiting for the account to be cleared. Also, if there were previous unpaid overdrafts in a consumer’s main account, the second chance account can help the consumer get back on good standing with Chexsystems as long as it is maintained responsibly.

6. Wait for the 5 year period frame of the Chexystems to expire. It will automatically ignore those financial anomalies before the 5 year period.

Chexsystmes seems to work, hence, why Bank of America and some other banks, use it to make informed decisions.

I hope this article is helpful in enlightening you on Chexsystems and their influence over banks in freezing an account.