April Bank Alert!

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We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Consumers Union on Thursday, April 12th, 2012

Guest Blogger: Christina Tetreault

For our April Bank Alert we’d like to highlight a bank practice that can leave consumers owing hundreds of dollars in fees before they even knows what’s happening. No, we’re not talking about re-ordering transactions to drive up overdraft fees. Some banks reopen closed accounts if a debit or credit hits the closed account – against the express wishes of the consumer. Back in 2010, The Consumerist compared this practice to “the worst zombie movie ever,” and now these involuntarily reopened accounts are commonly known as zombie accounts.

A zombie account can be a fee-generating monster. It may start with an account opening fee or an overdraft fee. Costs then escalate with the imposition of a monthly maintenance fee, along with additional overdrafts and late payments as additional debits hit the account. The end result can be frightening. The Huffington Post profiled one unlucky consumer whose zombie account racked up $438.35 worth of fees in three days.

Sometime zombie accounts are the result of a bank mistake, but not always. It is Chase policy to reopen an account if a deposit is received, and Bank of America will do so if a deposit or debit hits the closed account.

Banks have no obligation to inform the consumer that the account has been reopened. That means that the first word a consumer gets may be when a statement for the closed account appears, listing the accumulated fees and outstanding balance.

There may be an uptick in zombie accounts on the horizon. According to Javelin research, 5.6 million Americans moved their money in final months of 2011. This fact, combined with the growing use of automatic debits and direct deposit, may leave more folks vulnerable to zombie account attacks.

To avoid this happening to you, make sure to ask your bank whether it is policy to reopen an account after your close it, in certain circumstance. Be clear about what those circumstances are. Do they only reopen when a deposit comes in, or when a debit posts? Can you opt out? If so, do that. Make sure to check all bank statements that come to you after you close an account. Most banks do not provide a written confirmation that your account has been closed. Instead they rely upon the final bank statement to convey account closure. Open all communications from a bank that your had previously! And if you don’t see a debit or credit post to your new account, find out if it went to your old bank.

Has your closed account been reopened by a bank you were trying to break-up with?  We’d like to hear from you! Email your story to money@consumer.org.

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