ChexSystems compile consumer reports with information relating to your past handling of bank accounts. If you fail to payoff an overdrawn account, ChexSystems can share information pertaining to that debt with other financial institutions. Banks can refuse to open a new account or add you to an existing account on the basis of information provided by ChexSystems. However, having a bad debt reported to ChexSystems does not always prevent you from being added to an account.
Under federal law, banks do not have to open bank accounts for everyone and each bank develops its own rules and procedures for opening new bank accounts and adding new signers to existing accounts. Some banks check your credit report rather than a ChexSystems report before adding you to an account and some banks check neither. Banks do not have to refuse to add you to an account on the basis of negative information on a credit report or ChexSystems report but many banks do.
When a bank refuses to add you to an account on the basis of a ChexSystems report, you are entitled to a free copy of that report. You can resolve the issue by paying off the debt listed on the report as most banks will add you to an account once you have settled your debts with another bank. If ChexSystems erroneously reports that you have a bad debt, you have the right to have your ChexSystems report corrected. You just need to file a request with ChexSystems to have the correction made and submit some supporting documentation to support your case. ChexSystems must respond to your request within 30 days and make necessary changes to your file.
Some banks do not check ChexSystems reports before adding new signers to bank accounts. However, in many states, the Right of Offset law allows your bank to settle your unpaid bank debts by transferring money from your deposit accounts to settle these debts. If you owe a particular bank money and are added as a joint owner to a deposit account at that same bank, the bank in question could use money in the account to settle your delinquent debt.
You only have to contend with the Right of Offset if you are added to an account at the bank that you owe money to. However, another bank or creditor could petition the courts to garnish your deposit accounts to settle a delinquent debt. If a bank adds you to an account despite the negative information on your ChexSystems report, that could enable your creditors to garnish the account once you have been added to it.