What happens when one person gets hit with a ChexSystems report but they have or wish to have a joint checking account?
Joint bank accounts are often used by those who wish to share their finances, such as a coupe or a parent and a daughter or son. A joint account gives both account holders equal access to the account, and equal responsibility for the account’s management.
There are certain requirements that must be met in order for a bank to open a joint account, and certain restrictions that can apply. Opening a joint account is a lot like cosigning a loan – each party is guaranteeing the behavior of the other party and agreeing to accept the consequences for defaulting.
In cases in which ChexSystems comes into play, this can cause problems even for the joint account holder who is not involved.
Opening a Joint Account
Both potential account holders will have to fill out a bank application and verify their identity and that of the joint account holder. The bank will request driver’s license information or state identification information, Social Security numbers, dates of birth, and each current address
The bank may also check credit scores or reports for each applicant, and will often run ChexSystems on both account applicants to see if there is a report in that database. If either individual applying for a joint account has a record with ChexSystems, this may cause the bank to deny the joint application – and then even to deny the individual who did not have a ChexSystems report an account as well!
Since ChexSystems maintains a database of consumers who have mishandled bank account (such as failing to pay balances, writing hot checks, depositing bad checks, continually overdrafting their account, or kiting or floating checks), ChexSystems may have a record of any or all of these behaviors reported to them by prior banks or by merchants who have been unable to collect on checks written to them. This report can stay in effect for five years or more.
Current Joint Accounts
Since with a joint account, all signers on the account can write checks, make deposits or withdraw funds from the account, both account holders then share liability for actions taken and transactions that occur in regard to the account.
This means that if the account becomes overdrawn for any reason, the bank will hold all parties responsible, and if the joint account is closed for mismanagement by one account holder, the bank can and often will report all account holders to ChexSystems regardless of which account holder actually caused the problem!
Getting another joint account will be almost impossible, and even getting individual accounts can be difficult because each individual now has bad reporting through ChexSystems. Even if one individual passes away and leaves rights of survivorship to a persona listed in ChexSystems, the account may be closed if the inheritor of the account is not deemed a good risk by the bank, and the account may be reported.
Only open a joint checking account if absolutely necessary, and insist on transparency between all users of the account and any of its credit lines or debit cards. Since what one person does can affect everyone, negative behavior should be strictly avoided. If you have been reported to ChexSystems due to the behavior of a joint checking account holder, call CFS to see if anything can be done.