Predatory lending exists in the mortgage industry. Usually when a mortgage broker adds unnecessary fees to a bad credit application, because he knows the applicant is in dire straits.
Predatory banking may also exist for those who ended up at ChexSystems.
ChexSystems is a network of financial institutions (mainly banks) that regularly provide information on account holders who mismanage their checking or savings accounts. Almost all banks within the US are part of this consortium.
If you bounce a check and don’t pay it on time, you could end up at ChexSystems. Even if you receive a fake check and the bank suspects a crime, you could end up on the bench at ChexSystems.
And the sentence for this financial crime is not light.
If the bank that put you in ChexSystems refuses to release your name from the ChexSystems database, it will be almost impossible for you to get a bank account of any kind for 5 years.
Even if you pay off the defaulted debt, the bank could still hold you as a prisoner of ChexSystems. Wicked, but 100% true.
So naturally, when you have a situation where people are stuck between a rock and a hard place, the vultures come out to feed. Here’s what you can find if you’re looking for a non-ChexSystems bank account.
Before you pay money to any service that claims to provide you with a non-ChexSystems bank account, make sure it passes the following tests successfully.
- Make sure the bank is FDIC insured. According to the FDIC website:
“The FDIC, short for Federal Deposit Insurance Corporation, is an independent agency of the United States government. The FDIC protects you against the loss of your deposits if an FDIC-insured bank or savings association fails. FDIC insurance FDIC is backed by the faith and credit of the United States government.”
Simply put, if you decide to open a bank account with an institution that is not FDIC insured, you could essentially lose all your money if that institution goes out of business. Therefore, it is extremely important to check the status of the banks before opening an account. You can easily verify that a bank is FDIC insured on the FDIC website.
- If you are a credit union, make sure it is insured by the NCUSIF. NCUSIF insurance is similar to FDIC insurance, except it’s for credit unions. According to the National Credit Union Association website:
“Your credit union stock is insured by the National Credit Union Stock Insurance Fund (NCUSIF), a branch of the NCUA. Established by Congress in 1970 to Insuring members’ share accounts in federally insured credit unions, NCUSIF is administered by the NCUA under the direction of NCUA’s three-person Board Its share insurance is similar to the protection of share insurance deposits offered by the Federal Deposit Insurance Corporation (FDIC)”.
All credit unions that are insured by NCUSIF can be found at ([http://www.ncua.gov/indexdata.html]).
- Make sure the institution has a physical branch. This is one of the easiest ways to remove bad seeds. Banks with physical branches are always legitimate financial institutions.
- Do some background work on the bench. Perform a WHOIS lookup to see the bank’s domain name registrant. If it’s just one person, that should raise a red flag. It should always be the name of the bank or company name. Look on the banks website. There should be separate phone and fax numbers, and a legitimate mailing address, not a PO Box. You can always call 411 to confirm that the phone number matches the address listed. But also keep in mind that some banks have a central location where they take general calls.
- Make sure the bank does NOT require you to use direct deposit to open the account. There are some financial services that offer checking accounts without checks. (As far as I know, this is not a scam.) But what if you don’t get a direct deposit? Or what if you change jobs and no longer get your checks via direct deposit? So you’re basically back at square one. And if you want to use checks? I mean, a checking account without checking defeats the purpose of getting a checking account.
- Make sure the institution doesn’t charge you for common items like monthly statements, phone service, and withdrawals. I recently noticed that a financial service charges outrageous fees for options that are normally provided for free through regular banks and credit unions. They charged for everything except the kitchen sink, including: a fee to check your ATM balance, a fee to receive a monthly statement, a fee if you wanted to return something you bought at a retail store, a fee for use your automated phone service. And that was just the tip of the iceberg!
Just because you’re at ChexSystems doesn’t mean you should become a victim of financial drain tactics like these. There are always better alternatives waiting in the wings.