ChexSystems Reports

Deep down, you identify professionally as Yes Man. If you had it your way, every share account application would be approved so that EVERYONE is a member of your credit union. After about 561 newly opened share accounts (in a field of membership of about 200 eligible people), you receive a call from your boss.

Evidently, company policy is to verify the ChexSystems report before an account is opened. Who would’ve known? While I believe your unmatched positivity should be enshrined as Employee of the Month, about 560 of the ChexSystems reports were flagged as fraudulent. On second thought, your boss may seem a bit pessimistic, but you probably should’ve denied one or two applications.

Many credit unions choose ChexSystems reports to determine whether a person may open a share account. Ultimately, this method is a risk-based business decision for the credit union to make, but you may want to understand a few basic things when pulling this type of report to confirm or deny a share account.

These official ChexSystems’ FAQs provide general background information. For instance, ChexSystems is considered a nationwide specialty consumer-reporting agency and subject to the FCRA, (as opposed to Regulation B in most cases because most share accounts are not credit-based). Once requested, a member’s file could include things such as checking account closures or bounced check history. These reports provide a snapshot of who you may be granting an account.

Based on your go-getter attitude, I’m sure you’d love to know how the FCRA works with respect to the ChexSystems’ reports.

Since ChexSystems reports are governed by FCRA, you may only pull a ChexSystems report under certain conditions such as having a legally permissible purpose to do so. As a user of ChexSystems, the credit union must declare that it has a permissible purpose for accessing the report prior to receiving the furnished report.            

Permissible purposes for a consumer reporting agency to furnish a consumer report to a user, such as a credit union, include the following:

·        In accordance with the written instructions of the consumer; or

·       To a person, including a credit union, that the consumer reporting agency has reason to believe intends to use the report as information for any of the following reasons:

o   In connection with a credit transaction involving the consumer (including extending, reviewing, and collecting credit);

o   For employment purposes;

o   In connection with the underwriting of insurance involving the consumer;

o   As a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with an existing credit obligation; or

o   Otherwise has a legitimate business need for the information:

o   In connection with a business transaction that the consumer initiates; or

o   To review an account to determine whether the consumer continues to meet the terms of the account.


Credit unions do not need a member’s express consent to pull their credit report in every situation so long as they have a legally permissible purpose for accessing the information. The FAQs provide examples of legally permissible purposes that are relative to the business of a credit union:

Examples of legitimate requests include:

·       According to [the member’s] written instructions

·       A business transaction initiated by [the member]

·       Pursuant to a court order or federal grand jury subpoena

·       [A member’s] application for a license or other benefit granted by the government, when consideration of financial responsibility is required by law

·       A child support determination, under certain circumstances”


Keep in mind that if a member’s account application should be denied based upon the information within a ChexSystems’ Report, then credit unions may be required to send FCRA adverse action notices.

 For more information see § 604 of the FCRA.  Local counsel may be able to advise if your credit union follows the FCRA when utilizing ChexSystems reports to confirm or deny share accounts.

Credit union compliance professionals have two upcoming opportunities to participate in intensive training to gain essential compliance knowledge and keep their institutions running compliantly and smoothly: Regulatory Compliance School in Arlington, VA March 18-22 (happening now!) and Regulatory Compliance Certification School in Fort Lauderdale, FL (and live online) April 15-19.

Active, unexpired designations and training (including recertifications) earned in 2024 will be fully recognized by America’s Credit Unions. We are committed to serving your professional development needs.


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