Does the bank have to notify you when it closes your account?
No. This might surprise you, but banks can close an account for any reason and are not required to provide notice.
Let's say you have several bank accounts and rarely use one of them. It's possible you won't know the bank account is closed until you try to get money out.
What happens to your money if a bank closes your account?
If you have money in the account at the time it's closed, the bank is required to return it to you minus any outstanding fees. If an automatic deposit goes into that account after it's closed, those funds must also be returned. Typically, the bank will send you a check.
If your account has been inactive for years and the bank doesn't know where to find you, the money may have been sent to the unclaimed property office in your state.
In this case, to get your money back, you'll need to contact the appropriate office in your state (such as the State Treasurer) and provide documentation to verify your identity.
How can a bank account closing impact your life?
Having a bank account involuntarily closed can be a hassle for years to come -- here's how.
When a bank closes an account because of an unpaid balance or suspected fraud, it's reported to a company called ChexSystems. Banks routinely request a report from ChexSystems before allowing a new customer to open an account. So if you have bad banking history in your ChexSystems report, this can make it difficult for you to open a new account with another bank.
Another negative effect of bank account closings happens if your account is closed due to an unpaid bank balance. That debt could be forwarded to a collection agency. If your unpaid bank fees go to collections, just like other unpaid debts on your credit history, that action is reported to the credit bureaus and can affect your credit score for up to seven years.
How to protect your reputation as a bank customer
Here are two steps you can take:
- Get a free copy of your ChexSystems report once a year. Look it over, and if you find any mistakes, dispute them with ChexSystems.
- As soon as you pay off any outstanding balances with your old bank, you can request to have the record removed from your ChexSystems report.
And even if you made a mistake, had a bank close your account for valid reasons, and cannot erase the bad mark on your ChexSystems report, you still have options. Some banks do not rely on ChexSystems to screen new customers, or offer special "second-chance banking" accounts for customers who are rebuilding their ChexSystems history.
What to do if you want to stay with the same bank that closed your account
Even if you're annoyed with your bank for closing your account, you still might want to keep banking there. After all, changing banks can be time-consuming, and your current bank might have other great accounts and products, like rewards credit cards, that you want to keep using.
If you decide that you want to stay with your bank after the bank involuntarily closed your account, here are three steps you can take:
- Find out why the account was closed. Call your bank and ask it to explain why it chose to close the account.
- Pay the balance. If the reason the account was closed was due to an unpaid balance, find out how much it is and pay it off.
- Ask to reopen the account. Once your account balance is settled, the bank may be willing to reopen it. If it's unable to do that, you can explore opening a new account with the same bank. If the bank won't allow you to open a new account, it's time to look for a new financial institution.
If you believe your bank account was wrongfully closed, contact the Office of the Comptroller's (OCC) Customer Assistance Group. You can also file a complaint with the Consumer Financial Protection Bureau (CFPB).
Having your bank account closed against your will is a stressful situation, and hopefully this will never happen to you. But mistakes and misunderstandings do happen.
Keep in mind that even if a bank closes your account, it's not the end of the world. You still have options to try to fix the problem, open a new bank account, or rebuild your ChexSystems report to get back in good standing as a bank customer.
