Debtors frequently receive a discharge in Bankruptcy, only to find that they still can not open a bank account due to check reporting companies such as Chex Systems, Telecheck, and SCAN.
All these companies are considered consumer-reporting agencies, and similar to Equifax, Experian, and TransUnion. Nevertheless, they only provide deposit account verification services such as the reporting of bounced checks, to financial institution members.
Such information is meant to aid the subscribing institutions in identifying account applicants who may have a history of account mishandling (for example, people whose accounts were overdrawn and then closed by their bank).
Nevertheless, these entities, just like the Credit Bureaus, are still governed by the Fair Credit Reporting Act (FCRA) and other laws. Accordingly, Chex Systems, Telecheck, and SCAN can therefore still be sued under the FCRA for improper reporting just like Equifax, Experian, and TransUnion. For example, if Chex Systems fails to follow the dispute mechanism procedures on a disputed trade item in its report, it can be sued in Federal Court. Lets take Chex Systems by way of example:
As a matter of practice, each report submitted to Chex Systems remains for five years. After Bankruptcy, Chex Systems is not required to remove an accurate report previously submitted. Nevertheless, the reporting banks/members are obligated to update their reports with accurate information. Just like a member is obligated to update its reports with a paid in full or settled in full when applicable, a similar updating is required for bankruptcy discharges.
Since the Chex Systems report concerns the obligations owed by the debtor and not the collectibility of receivables on the banks’ books, if a debt is discharged in bankruptcy, a member must report that account as “$0.00 owed, discharged in bankruptcy.” If you still continue to have difficulty with getting a bank account after receiving a Bankruptcy Discharge, you may want to follow these steps prior to seeking the help of an attorney.
1) You must first order your free copy of the Chex Systems report. Under the Fair and Accurate Credit Transaction Act (FACTA) amendments to the Fair Credit Reporting Act (FCRA), you are entitled to a free copy of your consumer report, at your request, once every 12-months. Click here for a Sample Consumer Report by Chex Systems.
2) Once you obtain your report, you must then review the report for accuracy. Any accounts reporting a balance that were discharged need to be corrected. These accounts should be reported as “$0.00 balance, discharged in bankruptcy.” Remember, the same laws that apply to Equifax, Experian and TransUnion and which resulted in huge class action lawsuit, settlement, and new proper reporting requirements, also apply to Chex Systems.
3) Dispute the trade item. Disputing an account trade item is relatively easy. Simply send Chex Systems a copy of the free report you received with the improper information circled or otherwise flagged, your discharge notice you received from the Bankruptcy Court, “D, E, and F” of your Bankruptcy Schedules, and a letter explaining why the trade item is no longer accurate since the new balance is now “$0.00 after being discharged in Bankruptcy.” Also be sure to provide your complete identification, including your driver’s license number and social security number. You should also cc the correspondence to the offending bank. The Chex Systems mailing address for disputes is Chex Systems, Inc., 7805 Hudson Road, Suite 100, Woodbury, MN 55125.
4) Under the FCRA, Chex Systems then has 30 days to investigate the dispute. If it fails to investigate and respond, then the item must be deleted. By law, during this 30 day time frame, Chex Systems then contacts the reporting member to verify if the account is now a $0.00 balance and discharged in bankruptcy.
5) FCRA is then complied with or not. If the bank responds back that the account was not discharged in bankruptcy, or continues to report a balance, then both the bank and Chex Systems are liable under the FCRA for false reporting. Such liability would then entitle a debtor to actual damages, statutory damages, attorney fees, and costs. Moreover, while the lawsuit is pending, you could also add a brief statement to your consumer file with Chex Systems describing the fact that you are suing “XYZ Bank” and Chex Systems for their improper and false reporting over the improper account. By law, Chex Systems is required to provide this “dispute statement” with all Chex System inquiries it receives.
Typically, Chex Systems and the bank will follow the laws. In most cases, the previously reported debt will either be deleted in its entirety, or the report will be updated to reflect a $0.00 balance and that the debt was discharged in bankruptcy.
If you have NSF checks, doing nothing after bankruptcy with respect to Chex Systems is certainly the “kiss of death” in most cases for 5 years. But by following the above steps, it is not uncommon to get a new bank account within 60 days after a bankruptcy discharge, whereas without a bankruptcy, opening a new account would have been impossible.
If you have followed the above steps and are still being reported as having a NSF balance without bankruptcy notation, you should immediately seek a competent attorney in your area to pursue your rights under the FCRA and other applicable laws. Be sure to provide your attorney of the first report, the dispute letters, and the final report showing the false information remains.
Written by Michael G. Doan
Bankruptcy Law Network (BLN)
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Last modified: October 22, 2012