Does any legislation exist which permits or requires a bank to hold on to cleared funds against the explicit wishes of the account holder?
I recently transferred my home loan to a new bank. When the new bank paid down the balance on the old loan, they actually sent about $2200 more than the balance outstanding, leaving the account in credit.
Shortly after this occurred, I requested that the old bank withdraw the surplus amount for me, so that it could be deposited back with the new bank. They refused on the grounds that the loan account was being closed and I had to wait for that to occur.
Some weeks passed, and I received a letter from the old bank, which in essence said "we're keeping your loan account open indefinitely unless you advise us otherwise in writing, if you have a credit balance on your loan you may redraw it". So I went back to the branch, and again asked for the credit balance to be withdrawn.
Again they refused, and we spent some time arguing the point. Their branch manager insisted that there's legislation in place which requires them to keep the credit balance. I asked to see the relevant legislation, but of course the manager didn't comply.
I left them with the following written instructions after it became clear that they had absolutely no intention of actually helping me:
As far as I can tell, they've acted on exactly none of those.
So my question is, does any legislation exist that would give the bank grounds to hold my funds against my explicit wishes, or is what the bank's doing essentially theft?
It took them a few days (5 business days, to be exact), but they eventually followed all of the instructions I provided (excluding #4, as they did not charge any fees).
Though based upon jimsug's answer, that may be less because of any legal obligation and more because they finally decided to do better at customer service. My letter found its way to their complaints department, which took care of things.