Business Account Funds Availability and Privacy

Question: We have a construction loan contractor - let's call him Mr. Builder - who is all over the news in our town because he just filed for bankruptcy. He has advised sub-contractors to contact the bank for their payment. However, the funds have already been given to Mr. Builder and his business. What, under the privacy act, can we tell these people? Some of our officers feel we can tell them where the money went. Others are of the opinion we should just tell them the funds are not available. What should we tell them when they come in for money?

Answer: When I posed your questions to one of our attorney advisors, he said you probably would not be in trouble even if you did tell them the money was given to the contractor, because the privacy laws do not apply to business accounts. HOWEVER, it was his opinion you'd still be safer just saying there are no funds in the account, or the funds are not available. I concur.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 9, 9/05