Debit/EFT Coming Through a Closed Account

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Question:

What is the regulation (if there is one) that explains that a closed account can be reopened should a debit card or EFT/auto debit come through on a customer’s closed account?

Answer:

I have seen no regulation. Bank policy here can dictate if you will return a deposit on a closed account, but to reopen a closed account to pay a debit is to incur a loss unless you have another account from which to setoff. That could be done for a good customer, but since a closed account has no funds, and may have been closed due to identity theft, or the inability to stop some pesky ACH debit from continuing, I would shy away from reopening a closed account that will then be overdrawn. Surely, the customer will have every right to complain if you charge an NSF fee as well.

First published on BankersOnline.com 10/05/09