Bureau issues warning that reopening deposit account after consumer closes it violates federal law

A bank may violate federal law if it unilaterally reopens a deposit account to process transactions after a consumer has already closed it, according to guidance issued Wednesday by the federal consumer financial protection agency.

The Consumer Financial Protection Bureau (CFBP) asserted it has observed in complaints that even after a consumer completes all the required steps to close an account, the consumer’s bank has “reopened” the closed account and assessed overdraft and nonsufficient funds fees.

“Consumers have reported to the CFPB that financial institutions have also charged account maintenance fees upon reopening, even if the consumer was not required to pay account maintenance fees prior to account closure,” the agency said in a release.

The bureau said the guidance issued (as a circular) confirms that banks may risk violating the Consumer Financial Protection Act’s (CFPA) prohibition on unfair acts or practices by unilaterally reopening closed accounts.

“Consumers may incur overdraft, nonsufficient funds, or monthly maintenance fees when a closed account is reopened by the bank,” the agency stated. “This practice may also enable third parties to access a consumer’s funds without consent.

CFPB also said that, if reopening the account overdraws the account, banks may also furnish negative information to consumer reporting companies if consumers do not settle negative balances quickly.

“Consumers often cannot reasonably avoid the risk of substantial injury caused by this practice because they cannot control a third party’s attempt to debit or deposit money, the process and timing of account closure, or the terms of deposit account agreements,” the bureau stated.

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