Banks are Charging Fees to Close Accounts, Seriously!

Consumers Union, a consumer policy and advocacy group, surveyed practices of the ten largest banks regarding closed account fees.  The banks surveyed were: Bank of America, BB&T, Citibank, HSBC, JP Morgan Chase, PNC Bank, SunTrust, TD Bank, US Bank and Wells Fargo.  This survey was prompted by complaints from Consumers Union members, who claimed that banks made it difficult to close accounts.  It cost consumers both time and money to do close them.  More consumers were motivated to close their checking accounts based upon Bank of America’s announcement in October 2011 that they were going to charge fees for using debit cards. The bank canceled the fees shortly afterward based on public and political backlash.

Closed account fees

None of the ten banks surveyed made a free electronic funds transfer on the same day the account was closed.  All of the banks charged fees from $24 to $30 for wire transfers. Certified check fees ranged from $7 to $10.

The banks penalized customers who closed their accounts too soon.  BB&T and Citibank charge $25 if the account is closed within 90 days.  HSBC, US Bank and PNC Bank charge $35 to close the account, if it has been open less than 180 days.

Zombie accounts

Even after the account has been closed, some banks are reopening them, which are referred to as “zombie” accounts.  Because a deposit, credit or debit hits the account, the bank reopens the account.  Both Bank of America and Chase said they reserve the right to do so.  The consumer is unaware that this has happened, because the bank has no obligation to inform them that the account has been reopened.  The consumer is charged overdraft and/or monthly maintenance fees as a result.

Proposed changes

Consumers Union is calling on Congress and the Consumer Financial Protection Bureau (CFPB) to consider several policy changes. Here are some of the changes they propose:

Require banks to transfer a customer’s automatic payments and deposits from the old to the new account within 14 days.

Provide free same day electronic fund transfers.

Reduce check hold time, so consumers can access deposits in new accounts sooner.

Prohibit banks from assessing unfair account closure fees, and reopening accounts after consumers close them.

Banks should provide consumers with clear account closing policies. Consumers Union found that account disclosures and websites for all ten banks did not provide consumers with clear account closing policies.

Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Debt, Getting Credit, Money & Identity, Saving Money

This post was written by John Ulzheimer