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Warning Shots

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The first volley across ChexSystems' bow came from the Wall Street Journal. A 2000 article detailing stories of innocent citizens being placed on Chex' records due to mistakes or mismanagement elevated the company into the public eye.

• Introduction • One Strike, You're Out • The Paperless Trail • The Disloyal Opposition • Warning Shots • The Starving Class • An Alternative: PassChecking --- • Consumer Complaints about Chexsystems • Consumer Complaints about Certegy

The Journal article prompted the National Community Reinvestment Coalition (NCRC) to conduct a survey of America's major banks regarding how they used ChexSystems, and how those practices could be changed to enhance fairness to consumers. Among the findings of the NCRC report:

• Different banks have differing standards for what constituted NSF activity worthy of ChexSystems.

• Two banks responding to the survey reported that policies varied within their organization by branch or by region.

• The majority of the banks surveyed used the ChexSystems report as the most important factor for allowing or denying a customer a checking account.

• All of the banks involved rejected any attempt to open a checking account at another institution if the customer was on the ChexSystems' list, and all of the banks terminated any customer's account if they were placed on ChexSystems.

In 2001, nationally syndicated columnist Jane Bryant Quinn published a scathing rebuke to ChexSystems, wherein she accused the business of "ruining customers who make small mistakes with their checking accounts…It's one thing to exchange information about fraudsters who use 12 Social Security numbers. But it's a sin to punish small mistakes, by little guys, so brutally."

In 2004, California state senator Dean Florez (D-Fresno/Bakersfield) chaired a series of Banking Committee hearings on ChexSystems and its impact on both banks and consumers alike. The purpose of the hearings, according to Sen. Florez, was determining "What is a risky client? What does that entail? And, ultimately, whether or not we're drawing the line in the right place."

Several representatives from Chex' parent company eFunds attended the hearing, as well as members of the consumers' rights group Consumers Union, and individuals who were testifying regarding their experiences with ChexSystems. The testimony record indicates some deep divisions between ChexSystems' policies and consumers' financial reality, as in this exchange between Sen. Florez and eFunds representative Dennis Ambach:

SENATOR FLOREZ: Okay, so I guess let me ask my question again. Does anybody ever pay for this?
MR. AMBACH: No.
SENATOR FLOREZ: Ever.
MR. AMBACH: To my knowledge we have never asked, we have never charged a consumer. We can't charge it during an adverse action situation.
SENATOR FLOREZ: Okay, I'm just looking at your website that says, "You may order your consumer report through the convenient methods listed below. Eight dollars, all states not listed, $5 in Connecticut, $3 in Maine." What's not . . .?
MR. AMBACH: That's, I believe that's a legal disclaimer. We could.
SENATOR FLOREZ: "We reserve the right to charge a minimum fee."
MR. AMBACH: Yes, I think that-
SENATOR FLOREZ: And you never have. Ever.
MR. AMBACH: I will never say absolutely that in the 30 years history of ChexSystems, but it is our policy, stated, that we do not charge consumers.
SENATOR FLOREZ: Then why do you have this on your website?
MR. AMBACH: I believe we could do it. I think it has to be a legal disclaimer.
SENATOR FLOREZ: Could you get back to us on that?
MR. AMBACH: Absolutely.

Next: The Starving Class

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