CFPB Warns Banks Against Unilaterally Reopening Closed Accounts

Banks deciding on their own to reopen accounts that consumers had already closed are likely violating federal law, particularly if the bank collects fees on the account, the Consumer Financial Protection Bureau said.

Reopening a closed account without permission from the customer, even when a third party attempts to deposit or take money out of the account, would likely be a violation of the CFPB’s prohibition against unfair acts and practices, the agency said in a Wednesday circular.

Customers can face potential overdraft or annual fees that they didn’t consent to when accounts are reopened, the CFPB said.

“When a bank unilaterally chooses to open an account in someone’s name after they have already closed it, this is a fake account,” CFPB Director Rohit Chopra said in a statement. “The CFPB is acting on all fronts to halt the harvesting of illegal junk fees.”

The CFPB fined USAA Federal Savings Bank $15.5 million in 2019 for reopening closed accounts without customer authorization, among other alleged violations.

Rather than reopening an account when a third party attempts to deposit or withdraw money from it, the CFPB said banks should decline the transactions. That would give customers the opportunity to update their information with the financial institutions or with people attempting to access a closed account while avoiding potential fees, the CFPB said.