I requested the closure, and I was mailed my balance and told that my account was now closed, all dome in writing through the messaging system. Weeks later they paid my rent. Now they want me to repay them, even though I completely closed the account weeks earlier. They are trying to say that since it was auto-pay, that I was responsible for stopping the payment. My problem with this logic is that the account was closed. It should no longer exist. How does one auto-pay from an account that no longer exists? They are saying that the system "force re-opened" my account. IS this a real thing? Can anyone explain how I am responsible for payments made from an account that was closed weeks earlier?
I closed my CU checking/savings accounts. Weeks later the bank auto-paid my rent. Now they want me to pay them back
7Was this an auto-pay that you set up with your bank, or a direct debit that you set up with your landlord?– user253751Sep 13, 2022 at 13:42
3What does the agreement between you and your bank say? How about their auto-pay terms of service?– A CSep 13, 2022 at 14:02
8How is the landlord dealing with the unexpected payment?– Jiří BaumSep 13, 2022 at 14:07
5My bank agreements have generally been clear that they can do this and I will be responsible. (Unfortunately, the consumer power in this case is pretty weak.) As per, @AC, what did your agreements say?– prosfilaesSep 13, 2022 at 15:40
4Is this auto-pay a push (set up through the bank) or a pull (set up through the payee)?– shooverSep 14, 2022 at 20:18
You cannot make a financial gain from this situation
Not only would be immoral, it's just not how it works. Regardless who's fault it was that the payment was made, if they paid your rent, you owe them the money. At best, you might be able to tell them to reclaim the money from your landlord and pay your rent yourself, but there is no free lunch.
If you've already paid your landlord, or if you are no longer paying rent, then the bank should deal with the landlord to recoup the money.
Don't accept a financial loss either
From the situation you describe, the bank does seem to have made a mistake. Do not accept to pay any administrative fees/overdraft charges or other costs that the bank might try to tack on.
2The issue is that they may ask him to sign papers with unknown content. I don't want to be in such situation as it is wasting time and is risking signing something that is not in my interest. Sep 13, 2022 at 11:31
25Surely if the OP has severed his relationship with the bank, they have simply made an unsolicited gift to the landlord? OP has no involvement other than incidentally being the landlord's tenant. What he cannot do, though, is claim that that unsolicited gift is his rent payment, because he's severed his relationship with the bank. Sep 13, 2022 at 13:22
10@AndrewLeach If you view it that way, he still has to pay the rent, and then the bank can ask for their "gift" back. But it comes out the same.– BarmarSep 13, 2022 at 16:36
3@Barmar That is true but the actual rent payment is between OP and their landlord, the bank has zero role in it. The mistaken payment from the bank to the landlord is just between these two and OP has zero role in it. The bank seems to want OP to pay them back their gift to the landlord, that just shouldn't be OPs problem.– quaragueSep 14, 2022 at 9:50
4@quarague The most likely scenario is that the autopay was set up through the landlord and was not changed when the OP closed his bank account. Sep 14, 2022 at 15:57
This is fairly standard practice. For a period of time after closing an account, it will be automatically re-opened if a transaction posts to it. I asked about this the last time I closed an account, and they said that there's a number of different reasons that they do this:
- The former account owner is typically still interested in any deposits that may come in, including refunds that automatically get posted to the card used for the original purchase.
- Some transactions can take a long time to clear behind the scenes and could be in progress when the account is closed. Paper checks, in particular, have a bad habit of sitting for a long time before the recipient deposits them. The account owner typically intends for those checks to still be honored (otherwise they would have explicitly cancelled them).
- Paying a charge from the closed account is often times cheaper or more convenient for the account holder. Let's say I have my credit card bill on auto-pay from my checking account that I closed. The bank reactivates the account, pays it, and now I have an overdrawn account plus an overdraft fee. That's not great, but it's far cheaper than the fees and interest I'd owe by not paying my bill on time. Many automatic payments get processed on the due date so by the time you got notification that the auto-pay failed, it's too late to do anything about it.
- Some changes to bank account information don't take effect until "the next billing cycle". For things billed infrequently (such as car insurance that's paid semi-annually), that could mean that it's not possible to update your billing information before the old account closes. Processing that payment on the closed account is a much more straightforward problem to deal with than trying to figure out how to schedule everything to avoid a failed transaction.
- It helps the bank recover any outstanding fees that you owe them. The law gives the institution a "right of setoff", meaning they can deduct any unpaid fees you owe them from your account. When a deposit comes in, they can re-open the account, process the deposit, and deduct whatever you owe them.
It's annoying when the account automatically reopens, but in most cases it's less of a problem than what you could encounter if those transactions were rejected outright.
Regarding your specific situation, your options will depend on how this payment was set up. If this was a push-type payment (i.e., you configured your bank's bill-pay system to send $X on the first of the month), then this seems like the bank's error. Since you typically lose access to the online banking portal after closing your account, it's not reasonable to expect you to cancel it. The bank will have to cancel it for you.
If this is a pull-type payment (i.e., you authorized your landlord to charge your account every month), then the bank was not in error. They were honoring in good faith a recurring payment that you authorized. Your landlord might not have billed the correct account or may have auto-billed you even though you already paid via some other means, but that's a problem between you and the landlord. Some banks have ways to halt recurring ACH debits from their side - similar to stopping payment on a check - but you have to tell them which one to halt and it generally requires a fee.
2This is a good, extensive explanation, even though I find it strange: For example, after my credit card expires no merchant can charge money on it; the transaction is impossible/revoked/bounces, whatever. Your arguments could be applied to credit cards as well, or vice versa. Sep 14, 2022 at 23:41
3@Peter-ReinstateMonica Sort of. Credit accounts and deposit accounts appear similar but are two very different things, particularly in terms of what the law requires/allows.– btaSep 15, 2022 at 0:18
1@Peter-ReinstateMonica credit card expiration is known to merchants ahead of time, but we had a question recently about merchants continuing charging a card even though it was reissued due to fraud - which is kindof similar. Sep 15, 2022 at 0:39
3@Peter-ReinstateMonica Merchants absolutely can charge money on an account after the credit card you used to authorize the charge has expired. The expiration of the credit card does not expire authorizations to charge the account and a new credit card can also authorize charges to the same account. Sep 15, 2022 at 1:03
This answer assumes the OP is in the US. It may not be valid for other jurisdictions (especially in Europe). Given the lack of mentions of jurisdictions and implicit assumptions made in the question, I believe it is safe to assume that. If the OP comes back to clarify the jurisdiction, I'll update the answer.
Yes, you are. Even if they made a mistake, the intention was not to gift you rent money, and part of the terms and conditions that you agreed to when you opened the account is to cooperate with the bank in case of such mistakes.
You can ask them to compensate you for whatever costs you've incurred because of their mistake, but you most definitely have to return the money.
If they take it to court they will most likely prevail, and then you'll also need to pay their (and your) legal fees for that action. I see no reason why you'd want that.
In response to comments (and please don't downvote this just because you don't like it or don't think it's "fair"):
Terms and Conditions are a binding contract, even if the account is closed.
It doesn't matter if the account is closed, the terms and conditions the OP agreed to when they opened it are still a binding contract with regards to that account.
That includes the requirement to explicitly cancel all autopay schedules the bank seems to have and the OP apparently ignored.
The general rule of contract law is that contracts are enforceable. Claiming that the contract is "absurd" or "illogical" (as some commenters did) is meaningless in the court of law. In some countries there are rules and regulations as to what can be in a contract, but it is unlikely that a banking institution would be non-compliant.
Errors provisions are almost always a part of T&C.
Without seeing the T&C or even knowing what credit union (CU) it is and in what country, I can say with very high degree of certainty that the errors and mistakes provision is there. It would be an unthinkable malpractice for a lawyer to draft a terms and conditions for a banking institution without such a provision. Mistakes happen, they happen more often than you think, and neither side is supposed to benefit from them and either side is supposed to cooperate with the other on correcting them.
I have this provision in my rental agreement and every property purchase agreement I signed, the banks wouldn't have it? That's an unreasonable assumption.
Sending the CU to the landlord unlikely to work.
Some comments say "the bank sent the money to the landlord - they should ask the landlord to return it". The OP may suggest it to the CU (assuming the rent was already paid), but it is unlikely to hold in court. The bank was acting on the OP's instructions, and as such it will be the OP's problem, not the landlord's.
Asking an attorney.
Clearly, this is a contractual issue, so asking an attorney is always an option. I'm not an attorney. Duly licensed attorney in your jurisdiction can properly evaluate the T&C and your obligations under them and give you an opinion about your chances if the case goes to trial.
I'd be surprised if you get a different answer from the attorney, but anything is possible. It may not be worth it though, attorneys are pretty expensive.
The CU has power.
As mentioned in the comments, in some countries (e.g.: the US), banking institutions have systems to share negative information about clients. Reporting you to such a system may lead to you being unable to open new banking accounts, and having other difficulties in your financial life.
Clarifying some more misconceptions:
Account no longer exists when it is closed - no, that is not true. Closed account is still an account, it exists. Under some conditions it can be reopened by the bank and the owner will be liable (seems like this case fell into that category). Terms and conditions still govern.
Absurd clauses in T&C will not be enforced - no, that is not true. Terms and Conditions is a binding contract, and contract law applies. Unless there's an explicit law overriding the terms of the contract, the contract will be upheld and enforced. Just because you don't like the conditions or you think that the terms are absurd doesn't mean that the court of law would invalidate the contract.
Comments are not for extended discussion; this conversation has been moved to chat. Sep 17, 2022 at 12:32
1Please read The Intent and Purpose of Comments Also be mindful that this is not a "discussion board". Please continue the discussion in the linked chat. Any additional comments here will be deleted. Sep 17, 2022 at 12:36
This seems to strongly depend on the jurisdiction you are in. I posted a question on this situation on the law stack exchange.
If you are in the US, the bank is in the right here. Closing a bank account and revoking authorization to make payments from the account are two completely separate things. As I understand it, if you want to end your business relationship with the bank, closing the account doesn't actually do anything useful. You need to revoke the authorization of the bank to take money from the account and also give the bank a stop payment order. If you didn't do that, a closed account will just be reopened and the payments from it will continue as before. This is spelled out in detail in the contract you signed when opening the account.
If you are in Germany or I assume anywhere else in the EU, closing a bank account indeed ends your business relationship with the bank and afterwards it is the banks duty to block any payments to or from the account. If the bank fails to do that, that is their problem. Of course, if the bank makes an erroneous payment in your name you don't get the money. The bank will try to recover it once they notice the mistake and it is your duty to pay the landlord with your own money.
Why are you under the impression that the account no longer exists? All of its history and statements are still in the bank's database.
By setting up an autopay arrangement with your landlord, you have essentially authorized them to draft money from your account, similar to as if you had written checks against your account that had not yet cleared when you closed your account. I don't think this has the same potential legal consequences as a bad check, but it may.
Likely the bank is also charging you overdraft fees, with the potential for additional administrative fees due to dealing with your mistake. However, these fees are likely less than the late, bad-check, and/or bounced payment fees that your landlord could have changed you.
In the future, make sure that all autopayments are removed and all payments have been posted before completely closing an account.
An additional point:
Once a bank account is closed, there is generally no going back. However, there is an exception: Some banks may reserve the right to reopen an account if another payment or deposit comes through.
11This is a mistake of the bank, not of the customer.– wimiSep 13, 2022 at 18:11
5@wimi The OP hasn't stated that, as of yet. Everything he has said so far matches an autopay from an external source hitting a closed account. Sep 13, 2022 at 18:42
4@MichaelRichardson Everything OP has said is also consistent with an autopay set up at the bank side. Without clarification from the OP, both seem like reasonable interpretations.– marcelmSep 13, 2022 at 20:00
1OP wrote they closed the account. Therefore it does not exist anymore. The bank still has data about it, sure but that is completely irrelevant here.– quaragueSep 14, 2022 at 9:54
3I am under the impression that the account no longer exists because the OP can neither put money in it nor withdraw money from it nor file money anywhere, and so on. The OP is not a customer any longer with that bank. That there are still records of a demolished house is not an indication that the house still exists, which becomes evident when you try to move in. Sep 14, 2022 at 23:34
When a bank "closes an account," they don't remove it from its database tables, they only flag the account to reject certain transactions like ATM withdrawals. Because they have a responsibility to provide historical data (e.g. "back statements"), the inactive account will probably "live on" for several more years.
In this case, the bank forgot (or didn't advise you) to cancel all auto-pay services that you previously set up. These are often implemented by separate computer systems that were added on to the bank's infrastructure back when such services became popular. Think of a bank as a large, distributed, fault-tolerant computer system with many databases and many servers, and you will have the appropriate mental model: the right hand knoweth not what the left hand is doing, but it works as one big machine.
And since I'm supposed to answer the question... Yes, you owe them the money. Just pay them, and move on with your life. Sure, it is worth asking them to return any fees they charged you, politely, but accept whatever answer they give. There is an emotional cost to allowing your "blood to boil."
1Technical details are irrelevant for the law. OP cancelled the account, and with that, the contractual relationship between them and the bank end. The account legally doesn't exist anymore, even if historical data is kept. If the bank erroneously transferred money from a now defunct account, this is the banks fault. the bank can reclaim the money from the person they gave the money to, but they have no claim whatsoever against the OP. If the bank isn#t able to maintain heir systems properly, thats not OPs problem. Sep 14, 2022 at 18:51
3@Polygnome "OP cancelled the account, and with that, the contractual relationship between them and the bank end" - citation needed. That is not in fact true, the contractual relationships don't add just because the OP asked to close the account. Read your own bank account T&C again. Sep 14, 2022 at 23:10
@littleadv I don't know about your jurisdiction, but in mine, I have a contract for my bank account, and "closing the account" means cancelling that contract. After that contractual relationship has ended, the bank cannot magically out of thin air create claims against me -- at least not any that would hold up in court. Again, if the bank is unable to get their systems in order and erroneously sends money from a closed account, that is not my problem. They are legally entitled to the money, but need to sort that out with whomever they gave it to. It was not my money, it is not my problem. Sep 16, 2022 at 0:06
2@Polygnome well, I don't know about your jurisdiction, but I've lived in two different countries (US being one of them) and that's not how it works in either. Closing the account changes the status of the account, but it doesn't invalidate the terms and conditions you agreed to when you opened it. Sep 16, 2022 at 0:07
1@littleadv In law theory, there are two big types of law systems. Common law is mostly used by the US and the anglosphere. Civil law is prevalent in continental europe. Those are two different doctrines. In Civil law tradition, people enjoy a whole lot more protections than in common law, and what you can and cannot do with T&Cs is severely limited. This has nothing to do with being "civil", although I'd argue that civil law is indeed far more civil -- hence the name. Sep 16, 2022 at 0:17
If you setup autopay with your landlord and didn't cancel it, this is your mistake and you have to make it right. You aren't quite specific enough for me to say this is for sure what's happening, but that's what it sounds like.
Were you expecting the bank, who has had no prior contact with your landlord, to somehow tell your landlord to stop pulling funds from your account? You authorized your landlord to pull funds from your account and then you closed that account without telling your landlord. That means your landlord still had your authorization to use that bank to access your funds.
The bank had no way of knowing that you no longer wanted to pay your landlord. If you set up alternate payment arrangements with your landlord, then the pull was their mistake and you can try to get them to make good. But the bank only did what you authorized them to do, an authorization you never revoked.
1Couldn't the bank just respond "Sorry, that account you're trying to pull funds from is closed. No can do"?– justhalfSep 15, 2022 at 7:59
2@justhalf They could, but that would be awful for everyone involved. That bank wouldn't get paid. The landlord would incur a bounced payment fee despite having done nothing wrong. The account holder would have all the issues associated with having issued an electronic check on a closed account and likely owe his landlord bounced payment and late payment penalties. Everyone loses. Sep 15, 2022 at 8:19
These answers may be correct, but they are rather depressing.
One would assume (I think reasonably) that closing the account an automatic payment is tied to would also cancel the automatic payment, especially as there would be no way to manually remove the automatic payment after the fact (at least on any bank website I use here in NZ). Therefore it's very unreasonable for a bank to continue to enact the automatic payment on an account that is now closed and inaccessible to its original 'owner'.
I actually called one of my banks to ask, and they confirmed any authorised direct debits would fail and automatic payments from the account would be declined, so at least in NZ this would be very much the banks fault if this happened and not the responsibility of the (ex) user - at least as far as they were able to ascertain.
2Whether its depressing or not is a matter of priorities. Assume I have some debt which is due on September 15th, I would much rather have a new debt created on September 16th to cover an overdraft from the 15th on a closed account than to have a missed/late payment for an old debt which was due on the 15th.To me, it is very important for my debts to be paid on time and it is often much cheaper to cover an overdraft +1 day of interest instead of 30 days of interest + missed payment fee from the original debt. A bank paying a payment I forgot to change, out of a closed account, is a favor to me. Sep 16, 2022 at 13:29
I see your point, but I still disagree. Its like when a bank opens up an unarranged overdraft for you instead of just declining a POS transaction and then charges you for the service. I would FAR prefer the payment just be declined. If I honestly forgot to make other arrangements after CLOSING MY OWN ACCOUNT, thats on me and I would expect the bank to stop all transactions to and from the account. if I didn't forgot but the bank decided to take matters into its own hands I would be marching in there and demanding they rectify the situation. Sep 18, 2022 at 22:34