7

This is based on this question on the money stack exchange. Someone has a regular checking account at some bank. This is their only account with the bank. While using the account some automatic payments where set up. Now the bank account is closed. The customer and the bank agree to this, in writing. Some time after the closing date the timer for an auto payment triggers. The bank now reopens the account, makes the payment and then asks the customer for the money.

I would have expected that closing the account ends the contractual obligations of the customer to the bank and vice versa. The bank should automatically block any payments to or from the former account because it doesn't exist anymore. So I would have thought an appropriate reply to the bank would be along the lines: 'I have no account with you. If you made an erroneous payment to someone, go to that someone to get the money back. I'm in no way related to this.'

Apparently the bank thinks otherwise. Who is in the right here? Can the bank write in the banking contract that 'closing the account' does not actually close it? Assume US jurisdiction.

4
  • Does the customer have any accounts with the bank, or have all relationships with the bank been terminated?
    – ohwilleke
    Sep 14, 2022 at 10:39
  • 1
    @ohwilleke Added a clarifying sentence. Just this one account.
    – quarague
    Sep 14, 2022 at 10:41
  • 1
    Is this something that actually happened or just a hypothetical? The bank cannot unilaterally open an account for you and disberse money from it. (hey, Wells Fargo, that's for you). What should happen is the auto payment fails because it is no longer a valid acount.
    – Tiger Guy
    Sep 14, 2022 at 15:01
  • A more precise answer would be possible if a jurisdiction (country, and possibly state or province) is stated Sep 14, 2022 at 16:41

2 Answers 2

1

Can the bank write in the banking contract that 'closing the account' does not actually close it?

Yes, it can and it explicitly does.

That question does not indicate which bank they were doing business with but here is what Chase Bank has to say. Make sure to take note of the closing statement.

VIII. Closing Your Account

Either you or we may close your account (other than a CD) at any time for any reason or no reason without prior notice. We are not required to close your account at your request if you have pending transactions, the account is overdrawn, your account is subject to legal process (such as a garnishment, attachment, execution or levy) or any type of holds (such as collateral hold, decedent hold or deposit hold). In those cases, we will limit the types of transactions that you can make until pending transactions are paid or returned, the balance is no longer negative and any legal restriction/hold has been released. After we restrict your account in preparation for closing, we will not pay any additional interest on the account. We may automatically close your account if the balance is $0 or negative. Either you or we may close your CD account on any maturity date without cause.

We may send you written notice that we have closed or will close your account and return the balance less any fees, claims, setoffs or other amounts if the balance is greater than $1. After your account is closed, we have no obligation to accept deposits or pay any outstanding checks, but we may reopen your account if we receive a deposit. We will have no liability for refusing to honor any check drawn on a closed account. We may advise consumer reporting agencies of accounts closed for misuse, such as overdrafts.

This agreement continues to apply to your account and issues related to your account even after it closes.

https://www.chase.com/content/dam/chasecom/en/checking/documents/deposit_account_agreement.pdf


Here is some of their auto-payment legalese:

Cancellation/Termination: Chase can terminate this Agreement at any time with notice. You may cancel this authorization at any time by notifying Chase at least three business days prior to the date that you’d like the cancellation to be effective. You can cancel by secure email message on chase.com or using the payment page online; or by U.S. mail at Chase Auto, PO Box 901063, Fort Worth, TX 76101-2063. You can also call us to cancel or to ask questions at 1-800336-6675 for loan accounts or 1-800-227-5151 for lease accounts.

https://www.chase.com/content/dam/chase-ux/documents/personal/auto-loans/caf_form.pdf


Overall, it sounds like one hand doesn't care what the other is doing. I would assume the checking department is different than the auto-pay department.

Could Chase Bank have a better customer service experience? Certainly. Maybe a better agent would have spotted the auto-pay when closing the account.

Who is in the right here?

Based on the contract agreement, I would say the bank is. Ignorance does not absolve the account holder of responsibility.

2
  • Not sure who downvoted, I upvoted. So it seems 'closing the account' doesn't really stop the bank doing any payments from or to the closed account. That seems very strange to me but apparently that is what the contract says.
    – quarague
    Sep 14, 2022 at 15:51
  • @quarague I'm not sure either. I feel like I actually answered your question as opposed to the highest voted answer ¯\_(ツ)_/¯
    – MonkeyZeus
    Sep 14, 2022 at 17:28
2

Here is what should have happened, under US law. First, revoke authorization to take money: in writing. Second, inform the bank in writing that you have revoked authorization. You can also give your bank a stop payment order, again in writing with a copy of your revocation order, and at least three business days before the current payment. The latter step may well incur fees, and is used in case you can't effectively stop payments by revocation orders.

2
  • 1
    I would have thought that closing the account automatically includes all these revoked authorizations. The banks positions seems to be that this is not the case and if you close the account without revoking these authorizations they are still able to make payments from your closed account. Which of these positions is correct is the heart of my question.
    – quarague
    Sep 14, 2022 at 15:48
  • 1
    No, you must actually and explicitly revoke authority – it doesn't follow by law from closing your account. There may be an explicit "re-opening" clause in the contract, so check what the contract actually says.
    – user6726
    Sep 14, 2022 at 15:50

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.