Stu Straus of West Orange, N.J., is the latest person to fall victim to a zombie bank account.
According to the Star-Ledger, Straus was charged $1,555.61 in overdraft fees after Wells Fargo reopened an account he thought was long shuttered. What began as a $10 overdraft fee incurred in 2007 ballooned behind his back.
According to the newspaper, Straus, a small business owner, closed two lines of credit with the bank nearly five years ago and allowed a checking account with almost no money in it to lay dormant. However, a forgotten automatic payment from UPS likely triggered his checking account to overdraw. And like dominoes, that event reopened a line of credit, which was linked as automated overdraft protection.
But Straus said he never received any statements from the bank. He thought his accounts were closed for good and was never made aware that he had overdue debt -- debt that was accruing every day. Wells Fargo claimed it didn't have the documentation showing that the credit line was closed as the fees snowballed, according to the Star Ledger.
While this New Jersey man's story ended with the bank rescinding the fees and closing the accounts for good, ongoing tales from consumers underline how difficult it is to close a bank account in the era electronic payments, automatic billing and special lines of credit for overdrafts. Just like a codependent ex, banks seem to continue a relationship with you long after you thought you had broken up.
Earlier this year, HuffPost Money reported Taylor McKinley's saga to move his account out of Fifth Third Bank. His closed checking account was accidentally reopened by a direct bill payment for his commuter pass--and it accumulated almost $500 in overdraft fees before he noticed it had been reopened.
Banks seem to discount these stories as one-off events, but the stories keep coming. Frustration with consumer checking accounts--especially about fees associated with overdraft services--prompted the Consumer Financial Protection Bureau to set up a customer complaint forum on its website exclusively for checking accounts last month.
One of the problems facing consumers is that there is no standard regulation across banks to address account closing and mobility. Every bank--and there are nearly 7,000 in the United States, according to the FDIC--writes its own account closing rules. And those rules tend to be buried deep in the small print. Some banks reject automatic payments that are charged against a closed account, while others go ahead and reopen closed accounts to pay automatic bills. In the case of the latter, the reasoning is to ensure that customers don't miss bill payments that could have other fees attached (like a late credit card payment, for example.)
Meanwhile, the burden of closing accounts remains squarely on customers who are moving their money. Consumer banking experts agree that telling a teller that you want an account closed is not enough.
After closing your accounts--and double and triple checking that all the related automatic payments have been routed to a new account--experts say it is important to write a letter to the bank confirming the account closure.
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