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Question & Answer
Question: Do we always have to give customers advance notice in order to close out their accounts? Some are just constantly overdrawn and present a problem when they are charged for the overdraft. We read in one of your issues that we should be giving them a ten business day notice.
Answer: The ten business day notice is what our attorneys suggested is a prudent move for accounts with a good balance. If you think you have money in the bank, and you write a check for it, you expect the bank to pay the check when it's presented. If the bank, without notice, closes out your account and mails you a check in the meantime, it could cause you damage. For instance, suppose you had written that check for supplies for your business, the bank bounced the check because it had closed out your account without notice, and your supplier then cut you off. All kind of problems would then follow, including, probably, a lawsuit.
Closing out an overdrawn account is an entirely different matter. A customer would not expect an advance notice of you charging off his account! No advance letter is necessary in the case of an overdrawn account. However, a letter could go out following the closing, informing the former customer their account is no longer active. And the only time you do not need a letter on a good-balance account is in the case of a fraudulent account. That can be closed without notice. The balance is probably going to go into your general ledger account or used to offset your loss. Following that kind of a closing, I used to send a "Please contact the writer immediately regarding your account" letter.
Of course, they never do.
Copyright © 1999 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 9, No. 2, 2/99
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