The Chicago Clearing House is negotiating for a service that would let members screen loan approvals or new accounts against a data base of retail customers with a history of writing bad checks.

Any agreement would need to be approved by the boards of the Chicago Clearing House and the Midwest Automated Clearing House Association, according to a source close to the talks.

If an agreement is signed, the clearing house members probably would be given a discount on the service, which is provided by Telecheck Services Inc., a unit of First Financial Management Corp., Atlanta.

Banks typically use the data base before granting approvals for loans, before opening new accounts, and to recover funds from returned checks.

Fraud Often Goes Unreported

Chicago joins several other clearing houses and shared networks that are providing services designed to curb check fraud, which bankers believe has surged in recent years because of accelerated schedules for making funds available to retail customers.

Check fraud is impossible to quantify, because much of it goes unreported. Standard Register, a check manufacturer that supplies security Features, estimates check fraud at $4.5 billion in 1990.

In 1987, the Houston-based Clearing House of the Southwest signed an agreement with Telecheck similar to the one under consideration in Chicago.

Substantial Reduction in Losses

Telecheck, the nation's largest provider of check guarantee and check verification services, says that in the first year of that agreement, the banks in the clearing house reduced their check losses by $2 million and recovered another $2 million.

In previous years, the banks had recovered an average of $240,000.

California's Star System automated teller machine network started a service late last year aimed at reducing losses not only from fraud but from closed, frozen, or overdrawn accounts. Star maintains a data base of demand deposit accounts and their status, against which participating banks can compare checks received every day.

While most bank initiatives have been aimed at reducing retail check fraud, one bank, First Union Corp., recently announced a service to help corporate customers detect check fraud. The service gives controlled disbursement customers a daily listing of checks written for more than $100,000, and the payee's name. The inclusion of the payee's name enables corporations to verify whether the payee's name has been changed.

Data Base of Bouncers

Telecheck maintains a data base of check bouncers compiled from data submitted by more than 100,000 retailers and several thousand banks. The files include customers who consistently write bad checks, have closed accounts with checks outstanding, or have histories of loan writeoffs.

Telecheck also issues an alert if it detect a kiting scheme.

The Chicago Clearing House and the Midwest association represent 500 financial institutions in northern and central Illinois. The clearing house clears an average of 1.6 million checks daily.

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