Bank Account Opening

Transcription

1 Bank Account Opening 1. What information do banks and credit unions use to make account opening decisions? Financial institutions generally rely on three basic types of information: an individual s history using bank accounts, proof of identity, and indicators of fraud or identity theft. While these are the most common factors used to make account opening decisions, different financial institutions may also take into account a variety of other criteria including but not limited to non-fraud related criminal histories, employment history, residential history, and more. 2. Does my client need to have a government-issued photo-id to open a bank account? Yes. Financial institutions are required to comply with federal Know Your Customer regulations, which involve verifying identity. While a financial institution might accept multiple forms of ID, an applicant usually has to provide at least one form of a primary ID often government issued -- such as a driver s license, State ID, Military ID, Tribal ID or Passport. Many financial institutions may also require a secondary form of ID which may also include a school ID, major credit card, or other forms, depending on the institution. 3. Can my client get a bank account if he or she is not a US citizen? You do not need to be an American citizen, permanent resident or have a U.S. government photo-id to open a bank account. For example, the Mexican government issues Matricula consular cards to Mexican nationals in the United States. Many financial institutions now accept the Mexican Matricula card as well as consular IDs from other countries as a primary identification. Contact the financial institution in advance to inquire about its identification requirements. 4. Does criminal history matter when opening a bank account? Some financial institutions also look at criminal history, although this is less frequent and policies differ widely. Some may consider the type of criminal activity such as whether the person was convicted of a misdemeanor or a felony, the length of time since the conviction, how the consumer has addressed that criminal history, and other circumstances.

2 Bank Account Opening Assessment Tools 5. What is ChexSystems? ChexSystems, Inc. is a consumer reporting agency (i.e. similar to a credit bureau) that collects data from banks and credit unions on checking and savings account activity. ChexSystems uses this information to create tools, including consumer reports, for screening bank account applicants. 6. What does it mean to be in ChexSystems? Being in ChexSystems generally means that a financial institution has reported that the consumer has an outstanding debt and currently owes it money for a bank account fee or transaction in the past 5 years. Therefore, it is not desirable to be in ChexSystems. A consumer may also be "in ChexSystems" for other reasons including: if he or she has been a victim of identity theft or due to a reporting error, account abuse, or financial fraud. 7. What is financial fraud and how is it different from other information reported to ChexSystems? Financial fraud is more severe than account mishandling as it is intentional account abuse or theft. Examples of financial fraud may include: check fraud, theft, and identity theft. 8. What does it mean if my client does not have a ChexSystems report? Your client either has no deposit account history or Your client is in good standing status with his/her current or previously used financial intuitions. 9. Do ChexSystems reports contain any positive information? No, unlike other consumer credit reports, which contain both negative and positive financial information, Chexsystems reports only reflect negative information. 10. How long do negative records stay on a ChexSystems report? Although the Fair Credit Reporting Act (FCRA) permits all Credit Reporting Agencies, including ChexSystems, to report data for up to 7 years, ChexSystems currently removes negative bank account records after 5 years. 11. How much does a copy of ChexSystems report cost? Your client is entitled to a free copy of his/her report once every 12 months. 12. How does my client request a copy of his/her ChexSystems report? Your client can request a free ChexSystems report by mail, phone, fax or online at once per year. After requesting the report, your client will receive a hard copy of the report in the mail in approximately 5 business days. If your client is denied a bank account due to negative records on ChexSystems, he or she also has a right to receive a free report at that time. The financial institution is required to provide instructions on how your client may request the free report.

3 13. Which financial intuitions use ChexSystems? Today about 80% of all banks and credit unions in the United States use ChexSystems to verify new accounts. 14. Will my client be able to open a checking/savings account while in ChexSystems? Maybe, depending on the reason your client is in ChexSystems and on the financial institution s policies and procedures on ChexSystems waivers. 15. What is QualiFile? QualiFile is a risk management solution provided by ChexSystems to financial institutions. QualiFile uses more comprehensive information than just past bank account history to predict the likelihood that a consumer will be a good account manager into the future. 16. What model and data does QuliFile use to calculate the ChexSystems Consumer Score? QualiFile uses predictive models to integrate different data into a decision. This includes data collected by: ChexSystems consumer reports, consumer credit reports, plus third party entities like Lexis Nexis that provide consumer financial and nonfinancial data to ChexSystems such as check printing history, retail scans of checks, credit report data, and payday loan histories. All of these data combined create a ChexSystems Consumer Score that financial institutions may use to predict future banking behavior. 17. What is achexsystems Consumer score? It is a score that more and more financial institutions are using to assess risk among bank account applicants. The score ranges from The higher the score, the lower the risk of a consumer mishandling a bank account in the future. 18. What does a credit report have to do with opening a bank account? Financial institutions sometimes look for information that is usually found on a traditional consumer credit report such as public records, collections accounts and other negative account data. To obtain this information banks may: 1) pull an applicant s credit report from one or more of the three main credit bureaus; or 2) purchase it from ChexSystems through its account decisioning solution, QualiFile. 19. Does ChexSystems affect my clients Credit Reports? It only affects your clients Credit reports and scores if they owe money to a financial institution that either sells or outsources the debt to a collection agency which then reports it to the credit bureaus. 20. Will an out of state bank check my client s ChexSystems record? Yes, ChexSystems is a nationwide system.

4 Addressing errors or negative items on your clients ChexSystems reports 21. What is the first step to address errors or negative items if your client is in ChexSystems? If your client has a negative record in Chexsystems, it should be cleared as soon as possible. First he or she should pay back any money legitimately owed to a financial institution. If your client does not agree with the findings on the record or believes it is there in error, he or she should file a dispute with ChexSystems or the financial institution that reported the information. 22. If a debt reported to ChexSystems is paid in full, why does it still show up my client s report? Currently, derogatory remain on a ChexSystems report for a period of 5 years. However, the status of the debt will be updated to paid if the consumer has paid or settled the debt. A financial institution is likely to look at derogatory items more favorably if they have been paid. 23. What if my client cannot see the amount owed to a financial institution on his or her ChexSystems report? Financial institutions report varying levels of detail of accounts to ChexSystems. Furthermore if a debt is transferred to a collection agency, the amount reported to ChexSystems may not be up-to-date. Therefore, it is always a good idea for your client to contact the financial institution to which they owe a debt and request the accurate outstanding balance. 24. How does my client dispute information on a ChexSystems report? If your client does not recognize information on his or her ChexSystems report, or believes it to be in error or inaccurate, the first step is to use the dispute process to verify the data. Information on the report can be disputed directly with ChexSystems and/or the financial institution that reported the information. Consumers can dispute via ChexSystems, which has 30 days to investigate the report. The process is the same as disputing information with the consumer credit bureaus. A dispute form can be downloaded from ChexSystems website at Is it better to dispute with the financial institution or with ChexSystems? It is often best to try to talk first with the financial institution that reported a debt by asking to verify the information. If a direct dispute is successful, a consumer may also request that the financial institution update the record with ChexSystems. If not, your client can begin a dispute process with ChexSystems. 26. What if my client can t afford to pay the debt that he or she owes to a bank or credit union? What are his or her options? Sometimes your client can negotiate a payment plan or settle a debt for less than full amount. In such cases, it is important to review the agreement carefully and make sure they fully understand and can meet the terms. In addition, try to request a copy of the agreement in writing, and if not possible or encourage the client to document the details of the agreement including the date, time, and bank representative. Moving forward, it is important to document all payments and contact related to the issue.

5 27. When/Why would my client want to add a statement to his/her ChexSystems report? A consumer can also place a statement on his or her report. This is often a good option if someone would like to provide more information to a financial institution that may be looking at his or her report. Examples of this type of scenario may include if there is a debt incurred due to medical issues or if there is an unresolved record related to identity theft or fraud. Advise your clients to take caution when adding a statement to their report as it may be seen by any financial institution who reviews the account, though some will not see it at all. The statement may or may not impact the financial institutions decisioning process. 28. What are my client s options if reported to ChexSystems for fraudulent activity? Financial institutions take financial fraud very seriously. If your client has a history of financial fraud, you can help them prepare to explain the past but also recognize that their history may preclude them from opening a bank account at this time. 29. If negative information on my client s ChexSystems report is due to identity theft, how does my client prove that to a financial institution? Signs of identity theft may include inquiries with financial institutions that your client did not initiate, unrecognized check orders, wrong addresses, or other incorrect personal information. It is important that your client takes the necessary steps in order to address the identity theft, including filing a police report, in order to prove that the negative activities were caused by another person. If your client is unwilling to file a police report (such as if he or she knows the person who committed the theft), he or she may then have to accept the negative consequences associated with having the activity on his or her ChexSystems report.

6 Alternatives for consumer with records in ChexSystems 30. What bank account alternatives exist for consumers in ChexSystems? Some financial institutions may offer second chance checking accounts or savings accounts. Prepaid cards may also offer an alternative for consumers who can't qualify for, or don't want, traditional checking accounts. Consumers should always pay close attention to the cost and fee structures of prepaid cards before purchasing them. 31. What is a second chance account? A second chance account is a checking account offered by financial institutions for customers who have or have had negative information reported to ChexSystems. 32. Why might my client want to try to open a Second Chance account? If managed successfully for a period of time, second chance accounts often serve as a bridge to more traditional accounts and banking features. 33. What are the features of a second chance account? They may require a fixed monthly fee, limit account features like ATM withdrawals and check-writing options, account monitoring, and financial education requirements. 34. Which banks offer second chance accounts? Consumers may simply try running a search on Google or call to inquire at any financial institution. For example Wells Fargo and smaller banks including BBVA Compass, Woodforest Bank and Liberty Savings Bank, offer such accounts.

7 Banking the Unbanked: Account Opening Is a bank account right for your client? First assess why your client wants or needs a bank account Ask your client how a bank account could help with money management and budgeting Help your clients understand the benefits of a having a bank account. Explain that: Money in a bank is safe from loss, fire, and theft and is insured up to 250,000 by FDIC or NCUA If well managed, having a bank account is less expensive than using check cashing or other retail services and helps build assets for the future Having a bank account may help clients gain access to loans, credit lines, mortgages, and other products and services such as direct deposit, debit cards, ATM cards, and online banking Understanding obstacles to opening bank accounts If your client has been denied a bank account in the past, she should investigate whether the denial was due to past banking history reflected on her ChexSystems report. Your client can request a free copy of her ChexSystems report once a year at to find out whether she has a report and if so, what information is on it. ChexSystems only collects and sells information. ChexSystems is not responsible for making decisions as to whether an individual is approved to open a bank account. Being in ChexSystems generally means that a financial institution has reported that a consumer has an outstanding debt or currently owes money to a bank (or she is a victim of financial fraud). ChexSystems removes negative banking account information from its reports after 5 years. Create a plan to get out of ChexSystems If the information on a client s ChexSystems report is unfamiliar to her, she can file a dispute with ChexSystems or with the financial institution that reported the debt. Once your client confirms the information, she should repay the debt in full. If your client has multiple debts to pay, prioritize which items she should address first. The financial institution may accept payment in installments or a settlement payment if it is not possible for the consumer to repay the debt in full. A personal statement can also be placed on a ChexSystems report. This allows an individual the opportunity to provide report readers with an explanation of negative information that may be on the report (e.g. unexpected illness led to multiple payments to medical providers that resulted in unsustainable overdraft fees). When your client pays a debt listed in a ChexSystems report, that information will still remain on the report for 5 years but, the status of the debt will be updated to paid. Credit Builders Alliance ("CBA"), a not-for-profit organization, makes this information available for informational purposes only. It is not intended as legal, financial, or other advice, and you and your clients should consult qualified advisors before making any decisions. CBA does not represent that any of the information will produce results Credit Builders Alliance, Inc. Some rights reserved.

8 Banking the Unbanked: Account Opening Does your client have the necessary ID? Financial institutions are required to comply with Know Your Customer regulations, which involve verifying an individual s identity. The applicant usually has to provide at least one form of a primary ID, often government issued such as a driver s license, State ID, Military ID or Passport. Different banks and credit unions require different types of ID documents. An individual does not have to be an American Citizen or permanent resident in order to open an account in the U.S. Recently, small and large financial institutions began accepting the Mexican Matricula ID and/or tribal IDs from individuals applying for a bank account. Help your clients investigate the ID requirements of different financial institutions so they can be prepared with the right ID documents when they actually apply for a bank account. Will fraud impact your client s chances of opening an account? Financial fraud is a serious offense and generally viewed more harshly than account mishandling which is far more common than fraud. Check fraud, theft, and identity theft are examples of financial fraud. Financial fraud information is available through consumer report databases like ChexSystems as well as traditional consumer credit reports like those produced by Experian, TransUnion and Equifax. If your client has committed financial fraud, you can help them draft a personal statement to be included in their ChexSystems report explaining the past behavior. However, their history may preclude her from opening an account at the present time. ChexSystems offers options to prevent identity theft such as Theft Security Alert and Security Freeze. o Theft Security Alert may help prevent accounts and services from being approved in your clients name without their consent o Security Freeze will prohibit a consumer reporting agency from releasing any information in your client s consumer file without her express authorization How to help clients open and successfully manage an account Discuss with your client what type of products and services would help her to manage her money in the most cost-effective way. Help your client compare products by looking at differences in fees, monthly minimum balances, and services charges associated with accounts. Once your client has opened an account, coach her to verify direct deposits, check the account balance weekly, make regular savings deposits, and review her bank statement at once a month. Credit Builders Alliance ("CBA"), a not-for-profit organization, makes this information available for informational purposes only. It is not intended as legal, financial, or other advice, and you and your clients should consult qualified advisors before making any decisions. CBA does not represent that any of the information will produce results Credit Builders Alliance, Inc. Some rights reserved.