The Consumer Financial Protection Bureau Wednesday warned banks that reopening a deposit account to process transactions after a consumer has already closed it may violate federal law.
Some consumers have complained to the CFPB that their bank reopened an account and charged overdraft, nonsufficient funds and maintenance fees after the account had already been closed. Banks risk violating the general prohibition on "unfair acts or practices" by reopening closed accounts, the CFPB said.
"When a bank unilaterally chooses to open an account in someone's name after they have already closed it, this is a fake account," CFPB Director Rohit Chopra said in a press release. "The CFPB is acting on all fronts to halt the harvesting of illegal junk fees."
The CFPB's warning came in a policy statement, which is not legally binding, but rather provides advice on matters in which the agency plans to exercise its authority.
The CFPB highlighted that in 2019 it
The CFPB did note in its policy statement that a bank may require a consumer to provide a period of "advance notice," prior to closing an account to allow the financial institution to process negative balances or any pending payments, debits or deposits.
The bureau said that reopening a consumer's account may result in a bank furnishing negative information to credit reporting agencies and that consumers "often cannot reasonably avoid the risk of substantial injury caused by this practice." Once an account has been closed and reopened, a consumer cannot control if a third party attempts to debit or deposit money, the bureau said.
"This practice of reopening closed deposit accounts caused some account balances to become negative and potentially subjected consumers to various fees, including overdraft and [nonsufficient funds] fees," the bureau said in a
The general prohibition on unfair, deceptive and abusive acts and practices, known as UDAAP, is a violation of the Consumer Financial Protection Act.
