By Eileen Alt Powell
The Associated Press

Lisa McKinley learned the hard way what can happen when you bounce checks.

McKinley, 36, a single mother with four children in Milwaukee, got into trouble last year when everything went wrong all at once: The company she worked for went out of business, the bills started piling up, the washing machine broke.

As she juggled expenses, she wrote checks that overdrew her account. She couldn't cover them, so her bank closed her account - and no other bank would let her open another.

"I had a tough time," she said. "With no checking account, no bank card, I had to use cash or pay with a money order."

McKinley was one of the many consumers who find themselves shut out of the banking system after mismanaging their checking accounts and being blacklisted on a national registry.

Most consumers know that if they mess up with their credit cards, their credit reports will suffer. But few are aware there's a separate reporting agency, ChexSystems, that tracks those who bounce checks or overdraw their accounts.

Banks, savings banks and credit unions submit the names of problem customers to the registry, and the listing remains active for five years. Those on the list who try to open new accounts during that time are likely to be turned down.

The system, which dates to the early 1970s, is designed to help financial institutions fight check fraud. It's a rising problem, with banks and retailers getting stuck with upwards of $1.6 billion in bad checks a year.

Rahul Gupta, a senior vice president at eFunds Corp. of Scottsdale, Ariz., which operates ChexSystems, says the registry helps prevent up to $2 billion in additional fraud each year.

Still, he acknowledges some of the estimated 7 million to 10 million people on the registry are not thieves but consumers who mismanage their money.

And sometimes those consumers don't even know they've been blocked until they're turned down for a new account.

McKinley has since gotten a new checking account, due in part to Get Checking, a consumer education program underwritten by ChexSystems. But thousands aren't so fortunate.

Jim Tisdale, a former banker who works with the nonprofit Consolidated Credit Counseling Services Inc., a consumer agency in Fort Lauderdale, Fla., said some people are victims of their own sloppy bookkeeping. And, he argues, it isn't fair to blame the banks, which need tools to help them evaluate would-be customers.

"They have to establish policies for their operations, including reliance on programs like ChexSystems," he said.

Gupta of eFunds said information about a consumer remains on file for five years or until the financial institutionasks for it to be removed. "They want this as a tool that predicts consumer behavior," he said.

To protect consumers, ChexSystems must abide by provisions of the federal Fair Credit Reporting Act. That means consumers turned down for accounts have a right to copies of their registry report and can challenge entries or insert explanatory comments.

• Consumers can get more information at eFunds' Web site at www.chexhelp.com or call 800-428-9623. Sites for Get Checking classes can be found at www.aboutchecking.com.

How consumers can avoid banking banTips on how to maintain a good checking account:

•  Record the amount of each check you write in your check register.

• The same goes for withdrawals at automated teller machines, or ATMs.

• Open your monthly bank statement instead of throwing it into a drawer.

• Scan the statement to determine if the balance is roughly what you think it should be.

• Go through your register and check off the checks that have cleared as well as ATM transactions. Subtract the cleared transactions and any fees to determine your new balance, keeping in mind some checks may not yet have cleared.

•  Call the bank if you find a problem.

• Keep a running balance.

• If you think you've overdrawn your account, contact the bank.

Source: Bankrate.com