Compliance concern of the month: Is it unreasonable practice to resume bank account that customers formerly near process debits or deposits?

In May 2023, the Consumer Financial Protection Bureau provided Consumer Financial Protection Circular 2023-02 that deals with the resuming of bank account that customers formerly closed. Specifically, the circular alerts that it “can constitute an unfair act or practice” for a banks to unilaterally resume bank account that customers formerly near process debits or deposits.

My bank is questioning how this circular effects Regulation E (Expedited Fund Transfer Act) unapproved deal claims after an account has actually been closed. For example, if, after closing an account, a customer submits a prompt claim that an unapproved deal took place prior to the closure of the account, the bank should offer provisionary credit and enable the customer to access to those provisionally credited funds while it examines. (§1005.11(c)(2)(i-ii)). The just method to enable access to the provisionary credit is to resume the closed account. In addition, as soon as the account is re-opened, unassociated overdrafts, service charge, or other deals might happen.

QIs this now a “unfair” act or practice problem?

ANo. First, the circular states that it “can” be an unreasonable act or practices, showing that it will depend upon the particular situations. Indeed, regulators often acknowledge that whether an act or practice is unreasonable will depend upon the particular realities.

Second, the circular explains the circumstance where the banks “unilaterally” resumes an account even if “doing so would overdraw the account, causing the financial institution to impose overdraft and non-sufficient funds (NSF) fees.” In contrast, a customer looking for a credit for a supposed unapproved deal is probably taking an effort to “reopen” the account as that is the only useful method for the bank to offer provisionary credit, for the customer to gain access to it, and for the bank to withdraw it if the deal remained in truth licensed. Otherwise, individuals might close accounts, file incorrect claims, and not return funds supplied throughout the examination.

Moreover, the CFPB’s is worried about cases where, after an account is closed, the bank pays a product that puts the account into overdraft status or enforces overdraft, nonsufficient funds, or upkeep charges. The bank might prevent those results when it resumes the account to offer provisionary credit by returning any debits that would trigger an overdraft, as the Bureau recommends, and not enforcing any charges on an otherwise closed account.

For more details, contact ABA’s Leslie Callaway.
Please note that this area is not an alternative to expert legal suggestions.


A news media journalist always on the go, I've been published in major publications including VICE, The Atlantic, and TIME.

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