My credit's too poor to get a deposit bank account?

Factual Questions
1

I’ve started my own consulting business. A few years ago I had some financial problems as I was trying to break into the world of commercial real estate leasing (commission-based) and really wasn’t very good at it. I was dirt-poor and had a hard time paying my bills.

But I moved beyond that. I didn’t declare bankruptcy, but unfortunately my credit is now not so very good.

I went to a bank to open a deposit bank account and was denied. First off, I really don’t understand why my credit is really at issue when all I want to do is open a bank account for a corporation in which I am majority shareholder. With that said, it obviously is.

What are my options? I’m in Canada - that’s probably relevant to whatever my solution will be. I’m going to try another couple of banks tomorrow and see if maybe someone else will take me. If that doesn’t work, however, what do I do? I need an account for my business. Of course, I have personal bank accounts, but I need one specifically in the name of my company. Suggestions?

2

You didn’t say whether “moved beyond that” included paying off your old debts.
Peace,
mangeorge

3

Yup, debts were paid.

4

You should be albe to transfer ownership by ‘selling’ 50%+ of yoru shares to another party, opening up the account then buying it back.

I don’t really understand why they are givign you a problem with a savings account, maybe they have some liability with a checking account, but it will be the corporations account not yours. did you try a commercial bank? Also a small savings bank might be falling over themselves to land a corporate account (small though it is) - that’s the route I took.

Just to add on the small savings bank, I did some work at some of their sites. Saw a chart that was for an employee bonus program. for every ‘basic checking’ account opened up the emplyyee would get somehting like 2 points, savings 4 points, ‘advanced checking’ 8 points, money market = 10 points, business checking 30 points and business savings 30 points.
I’m not sure of the numbers but they are close enough and make the point, I make some employee very happy. Also the bank has been very helpful, much more so then they would be with just a personal account (i.e. any questions they would call and ask what to do instead of just canceling the transaction and sending a letter, covered uncleared checks, etc.)

5

I don’t understand what you mean by “deposit bank account”. Surely there must also be withdrawls? Is there a line of credit involved? Are you talking about a checking account? Savings account? Escrow account?

Anyway, why don’t you talk to the CFO of the branch and request an explanation?

6

Cool.
Then I don’t see the problem. I have quite a few friends and family who’ve started their own business’ (they all have jobs now ;)), and they didn’t have any trouble opening accounts. Except my brother, but he had a history of overdrawn accounts. I’m assuming you want checking because that’s mostly what a corporate account is for.
Good luck.

7

Get a Dun and Bradstreet number for the corporation - use that instead of your social security number.

That’s what I was told, anyway. I’m sure somebody will shoot it down posthaste.

8

kanicbird suggests;

This is legal? Smacks of larceny to me, my friend.

9

In Canada, there are no small savings banks. There is a small handful of banks and the cover the country like a an algal mat. Moreover, the “big four” have been attempting to merge to two for years, although so far the govt has blocked them. Still, there are some quasi-banks that are something like credit unions and perhaps one of them would be more accomodating. BTW, there is not, in Canada, a significant difference between savings and chequing accounts. You can get cheques for savings accounts and neither use passbooks. The main differences are in the charges and whether you get cancelled cheques back.

The US used to ban banks from operating in more than one state. This fell to Reaganomics. There was significant competition among banks and small banks did tend to me more helpful. No more.

10

Did you try the ATB, Morkl?

11

Mork:
I’d be curious to know as to whether or not you bounced any checks during your period of economic hardship.

12

I’ve worked for a humungobank in the USA for many years.

We run two checks at account opening (for checking accounts):

Credit…and banking history (thru Chex systems), and NCPS as well.

Bad credit is completely different from a bad Chex systems/NCPS report, and both can get you denied for an account.

NCPS is to whom your banks report you when the bank closes out your checking account for more than $100 or so in unpaid overdrafts. No way no how are you gonna get a checking account if you show up here, and records are on file for at least seven years. Ithink it also shows up returned checks unpaid, but my company doesn’t use it for that, we use Chex for that little detail.

Chex systems also checks that as well as returned checks unpaid.

We also run a quick credit check (and yes, it shows as an inquiry on your credit report), bankruptcy usually means you no way no how will get a checking account, sometimes bank managers can override this. If you have any “majors”…30, 60, 90, or 120+ day lates showing up…you will probably be declined for a checking as well, unless it’s just one or two 30 day lates or so. I don’t make the decisions here, our banking security department decides who gets an account or not. Bottom line is, if something shows up here, it goes to Loss Prevention and you may or may not end up with an account.

The person who opens your account is required by law to disclose the credit inquiry, either by words or in written form on the application (they don’t have to point it out, it’s up to you to read it). It’s the FCRA, or Fair Credit Reporting Act.

Now, these are for checking accounts, savings accounts are usually treated differently…although if you have really bad credit, you probably won’t get one of those either.

Business accounts, my bank doesn’t check credit but we DO run Chex and NCPS…having a bad banking history will get you turned down for a checking as well.

Why checking? easier to commit fraud…you can write a bunch of bad checks in a hurry, abscond with the merchandise, and leave the bank with a big loss. It happens all the time, and unfortunately good people like you are paying for it.

It might be worth a talk with the branch manager over this issue…they can sometimes override the decision.

good luck!!!

13

IANAL, but…

It seems to me this boils down to should the bank be checking your personal credit for a corporation. I think this can be avoided if you refuse personal information, and provide only a federal tax ID (or canadian equiv) or a D&B instead.

If you are only an officer of the corporation, there is no reason for the bank to have your personal details. If the bank is provided with all of the corporate paperwork (when I got a corporate account they wanted the minutes from the decision to go with such and such bank, complete with corporate seal) there shouldn’t be a problem.

Another avenue is online banking, which again may be different for Canada, but when I applied for a corporate account, they only wanted us to Fed’ex the corporate documents, no personal info.

I’ve noticed in the US significant regional differences between bank policies. I think banks in rural areas may experience more fraud losses as a percentage of revenue.

14

Sounds like the bank is afraid of check kiting. Kiting is when you write checks from account to account to cover expenditures without actually having the funds. It’s like musical chairs and the loser is the last bank standing.

"Check kiting is generally considered a process whereby a person with a checking account in two banks can create an illusion of money in his account. A check drawn on the first bank is deposited with the second bank. Before the check reaches the first bank for payment, a check drawn on the second bank is deposited to the first bank. If the bank is willing to give immediate credit in the interim, the person can use the bank’s money without first providing collateral and without paying interest. This scheme can go on as long as the person keeps depositing checks in both banks and both banks believe there is money behind the checks. "

http://www.klbf.com/CM/Articles/articles13.asp

You indicate you have more than one personal account. If you often transfer funds between them, or have had trouble with overdrafts, kiting might be a concern. The bank won’t tell you that, of course, or even suggest the possibility, but they sure can and will deny you the ability to open another account, especially a corporate one because of the different set of laws governing corporations.

15

While the bank is certainly concerned about fraud, the real bottom line is this: research shows that people with a poor credit history tend to be sloppy with their bank accounts. There is a direct correlation between credit score and bounced checks, overdrafts, etc. These type of accounts take much more time, effort, and human intervention to manage than a “good” account. Research also shows that these accounts tend to smaller balances and close more quickly, often in overdraft. In this instance, it’s not the big bites of fraud the bank is trying to control but the bee stings of small, poorly handled accounts.

What the bank is saying, moreso than “We think you’ll defraud us” is “We don’t want the hassle of dealing with you”. A corporate tax ID would help.

16

IIRC, the report of bad check is on file for at most seven years.

17

You might want to check out www.chexvictims.com for alternatives.