NEW YORK — 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 simply make mistakes in handling their money.
And sometimes those consumers don't even know they've been blocked until they're turned down for a new account. That's what happened to Shaun Dettloff, who owns a sunglass distribution business in Fountain Valley, Calif.
Dettloff, 30, closed a personal bank account and then moved. He wasn't aware that a couple of checks came through later and didn't clear, or that bank letters seeking reimbursement went to his former address.
When he tried earlier this year to open a new business account, he was turned down. The financial institution found his name and outstanding debts on the ChexSystems registry.
"It was definitely my fault," Dettloff admits. "I wasn't very good about balancing my checking account, but it was an honest mistake."
Both Dettloff and McKinley have since gotten new checking accounts, due in part to 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 institution that posted it asks for it to be removed. "They want this as a tool that predicts consumer behavior," he said of banks.
To protect consumers, ChexSystems must abide by provisions of the federal Fair Credit Reporting Act, just like the major credit bureaus, he added. 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 1-800-428-9623.
Until a few years ago, consumers on the ChexSystems registry often were blocked from the banking system for five years or more, and consumer activists complained that they had no redress. In response, ChexSystems began working with the University of Wisconsin Extension system in the late 1990s to set up Get Checking, an educational program designed to help consumers with a history of bounced checks get back into the banking system.
Get Checking classes are open to consumers who aren't suspected of fraud and who make good on their outstanding checks and overdraft fees. Tuition for the six-hour classes generally is $40 to $50, and those who complete them get a certificate that allows them to open a new account at participating local banks and credit unions.
McKinley attended the Get Checking class at the Consumer Credit Counseling Service of Greater Milwaukee.
"I was embarrassed about my situation, but then I discovered there were a lot of people just like me there," she said.
Dettloff was allowed to open his new business account after attending a Get Checking class at the nonprofit Consumer Credit Counseling Service of Orange County in Santa Ana, Calif.
"The class was made up of ordinary people, young and old," he said. "Maybe they didn't balance their books right or made a mistake, or times were tough and they got into the system."
But, he said, they all reached a similar bottom line: "It taught me, 'Shaun, you have to balance your checkbook.' "
David Gomez, who runs the Orange County program, said the course teaches basics about checking, from how to open an account to filling in a check register and balancing a checkbook.
"Some people tell me, 'I've never done this before,' " Gomez said. "I tell them, 'That's why you're here.' "
Kathryn Crumpton, who supervises the program in Milwaukee, said the goal is not only financial education but also getting people back into the banking system.
"We don't want to push people to check-cashing places, incurring all those expenses, and we don't want them walking around with a lot of cash," Crumpton said. "We want them to have the safety of the banking system."
Sites for Get Checking classes can be found at www.aboutchecking.com.