Bank Accounts Are Hard To Close, And Even Harder To Keep Closed

How Closed Is Your Bank Account?

Some customers who closed bank accounts at Bank of America last fall recently received an unwelcome surprise: Their accounts reopened. Perhaps even more perplexing for these customers: It's the bank's policy.

Bank of America will reactivate a closed account if an electronic deposit or credit, like an automatic bill payment, is made. "If we receive something, we may reopen the account to accept the item, and the account may be subject to associated fees," Betty Reiss, a Bank of America spokeswoman, told The Huffington Post. "We remind [customers of that] when they are closing the account."

JPMorgan Chase also will automatically reopen a customer's account after it's closed if the bank receives a deposit. The bank, which recently eliminated its policy to charge customers an account-closing fee, indicates in its fine print that "any closed account may be automatically reopened if we receive a deposit to the account." JPMorgan Chase declined to further comment.

Complaints about closed accounts coming back from the dead have shown up on blogs and message boards for several years. But so far the complaints have not led to a policy change.

For customers, an old account reopening can be unexpected. At best, someone might happily learn that a former employer directly deposited some cash into the account. But if an account is reopened, however, and there's no money there, a person could get hit with an overdraft fee to fund an account maintenance fee or an automatic payment. Even in the first case, a maintenance fee could be assessed.

And it's hard to say when these customers would finally realize their banks accounts have returned from the dead.

To be sure, for most people, a conversation with a branch manager might clear up any fees, but the aggravation is essentially an additional -- and hidden -- cost for banking customers.

At other banks, even shuttering an account has obstacles. Accounts that are open and closed within 90 days, often come with an additional price tag. Sovereign Bank, Citibank, PNC Bank and U.S. Bank charge $25, reported the Boston Globe. Some smaller banks can charge as much as $50.

That it is as hard to kill a bank account as it is to slay a zombie is not new news, but the various banks' policies are becoming increasingly important as more consumers switch banks. Bank of America reported a 20 percent jump in account closings in the fourth quarter, CEO Brian Moynihan recently said.

Banks and consumer experts agree that it is the responsibility of an account holder to transfer all regularly scheduled transactions conducted via electronic deposits and payments to a new account. Even for customers who have gone through hoops to disentangle themselves from their big bank, the practice of reopening accounts can leave a very unwanted aftertaste.

One former Bank of America customer complained on Dec. 7 at CustomerServiceScoreboard, an open Web forum for consumer complaints, that a direct deposit of a paycheck reopened her account after she moved her funds to a credit union:

I closed my account and went to a local credit union. After I had closed my account, I had some difficulty because a paycheck was direct deposited to my old, closed account. When I called Bank of America about this, they told me the funds had not been deposited and that they could not hold them for me when they were received. Instead the funds would be sent back to my employer. Working with my HR department, I found out that the funds had actually been deposited and that the customer service representative had simply not taken the time to look it up and lied to me about it.

While it may be easy to point the finger at BofA and Chase, these banks are not the only ones. Commerce Bank, a midsize bank in the Midwest also has a policy of reopening a checking account if an electronic deposit is posted to it.

"Although they are well-intentioned, customers frequently forget to cancel an automatic activity, especially if it doesn't occur every month," stated Patty Kellerhals, director of core retail banking at Commerce Bank via email. "So if there is activity within 45 days of a zero balance event, we view the account as open or active and honor the deposit agreement in place on the account."

As the web of electronic payments and credits gets more elaborate for consumers, they find it increasingly difficult to keep track of all of them. This kind of stickiness is one reason Rep. Brad Miller (D-N.C.) last fall introduced the Freedom and Mobility in Consumer Banking Act, which would require all banks to grant customers the right to close an account at any time, regardless of whether the balance is positive, zero or negative and keep it closed unless a customer specifically requested a reopening.

"There is not real healthy competition because it is so hard to move from one back to another," said a spokesman from Rep. Miller's office. "You have automatic deposits and [banks] have no responsibility that they end up in right place."

The policy at some institutions of reopening closed accounts underscores how deeply banks can sink their teeth into customers. As figures from last fall's so-called exodus from big banks revealed, there was a gap between talking about breaking up and actually doing so. From September to December, more than 5 million people switched financial institutions, according to Javelin Research and Strategy, a financial services research firm.

That number is on par with those from other quarters, but last fall, something different happened. The reason for switching banks changed. Eleven percent, or 610,000, of bank switchers said they moved explicitly because of not liking their big bank, and mentioned Bank Transfer Day, a protest against large financial institutions. But compared with the amount of buzz for the movement -- 22 million hits on the phrase on Google -- the actual number of people who moved was relatively small.

"That points to how difficult it is to move from one financial institution to another," said Jim Van Dyke, a founder of Javelin.

The hunt to pinpoint banks' rules for closing an account highlights the range of policies that banks have -- and how tricky it can be to understand, as a consumer, exactly what they are at each institution.

Many banks, including Citibank and Wells Fargo, said they do not reopen closed accounts. At Wells, for example, an account is closed only when the very last penny is taken out and a customer has made an explicit request to close the account. Representatives from TD Bank, Fifth Third Bank and PNC also said their institutions do not reopen closed accounts.

"It's in [banks'] financial interest to make it as difficult as possible to close a bank account and move elsewhere," said Jean Ann Fox, director of financial services for the Consumer Federation of America, a consumer lobby group in Washington, D.C. "[Consumers] need clear rights to be able to close an account and go elsewhere. That is something CFPB should be looking at and it would be addressed by Rep. Brad Miller's [bill]."

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CLARIFICATION: An earlier version of this story said that if a bank account is reopened, and there's no money there, the account holder could get hit with an overdraft fee. It has been updated to explain the overdraft fee might be assessed to fund an account maintenance fee or an automatic payment.

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