Sometimes I get calls from people anticipating judgments who ask me how to protect against creditor garnishment of cash in their bank accounts. In many cases I have advised them to use new banks located in states outside of Florida.
When some of these people try to open new bank accounts they find that the bank rejects their accounts. Most of these debtors assume their accounts are rejected because they have bad credit or because a lawsuit has already been filed against them.
I called one such bank to ask the bank manager how they screen new account and why they had rejected on of my clients. The bank said that their rejection has nothing to do with the applicant’s credit score or legal entanglements. Banks do not run credit checks on new customers unless they apply for credit, and they do not search court records to see if the applicant is being sued or has a judgment against him.
What banks do is run new account applicant’s name through a service called ChexSystems. The report shows if the applicant has overdrawn accounts or unpaid bank fees at any other U.S. bank. Most banks will not open new accounts for people who owe money for prior checking accounts. ChexSystems will not get involved in settling old disputes between the applicant and prior bank. The applicant has to pay the past due fees to the old bank, and then ChexSystems will issue a clean report.
Sometimes it is not easy to pay past bank charges. One of my clients was flagged for unpaid fees to a bank that no longer exists and had been taken over during the financial crises. He has no idea how to settle this charge and clear his report.