Question & Answer

Question: We had an account opened a couple of weeks ago with an opening deposit of $137 in cash. Since then, our new customer has written over $9,000 worth of checks against the account. We've returned them "NSF", but we've now charged off the overdraft and are getting ready to close the account. Checks are still coming in-we had 40 of them last night. Is there any reason we can't return them "Account closed"? All the information she gave us was false.

Answer: No reason at all. You obviously have a fraudulent account. The biggest difference in the reason for return is that writing a check that bounces "NSF" is a misdemeanor, and writing a check against a closed account is a felony. You'll be giving the merchants she has cheated some additional ammunition.

As long as you are closing an "NSF" account, especially with a charge-off, and have notified your customer through the mail as a regular course of business, you are probably OK. The problem arises when you close out an account with a good balance, without prior notification to the customer. The customer thinks they have a good balance, and may draw against it. Your return of that item could be construed as what is known as "wrongful dishonor" (read?"You now have a lawsuit on your hands!") Our attorneys on staff suggest ten business days notification if you want to close out an account with a good balance. (See Training Page #20, "When You Don't Want The Account."

HOWEVER?our response to the case above is where all the information given by the account applicant was false-not that of a real person.

Please be aware that there is a case on file where the financial institution opened an account for an impostor, subsequently closed it-and lost big time.

A woman came in and opened an account using all the information of a real person whose identification she had stolen. The impostor then started passing bad checks all over town, which were bounced "NSF" by the bank where she opened the account.

The real person, whose identification was being used, found out about it when her genuine check drawn on another bank was refused because her name was on a "black list". She found out why, and went to the bank that had opened the fraudulent account and complained.

They realized they'd been fooled, and closed the account. Now the checks were returned "Account Closed" instead of "NSF", allowing the merchants to take legal action. Unfortunately, the police took action against the real person-not the impostor. She spent several nights in jail before it was all straightened out!

She sued the bank?and won. The court said the bank "had not done all it could do to identify its customer." We're right back to "Know Your Customer"!

One last word-if you close an account for cause, try to be sure it stays closed. Some of our programs allow a simple deposit to reopen the account.

Copyright © 1996 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 6, No. 4, 1/96