Question of the Week: Deposits to Closed Accounts

Question:  A member recently closed their account. The credit union has since received a deposit. Can the credit union re-open the account and accept the deposit to apply toward an amount the member still owes the credit union?

Answer:  No. The Consumer Financial Protection Bureau recently published Circular 2023-02 to address the unilateral re-opening of a closed deposit account by a financial institution to process a deposit or a debit. The CFPB states such an action could constitute an unfair act or practice because it may impose substantial injury on a consumer. According to the CFPB’s analysis, the account could be overdrawn, which would result in the accumulation of fees. And if a consumer does not repay the amount owed quickly, negative information may be furnished to consumer reporting agencies.

In addition, if a financial institution processes a credit through an account that has been re-opened, the consumer’s funds may become available to third parties that do not have permission to access their funds.

For these reasons, the CFPB states government enforcers should consider whether a financial institution has violated the prohibition against unfair acts or practices.