I was unaware that my BBVA Compass Bank account was closed on 8/31 due to a negative balance of $85. I was unable to contact the banking establishment to advise them that my monthly retirement check on a greater value was scheduled to direct deposit on 9/1. The bank representative had a "speaker"conversation with their Recovery Department and was told that my deposit was being held, however she stated that - "I'm going to process the deposit and apply the balance to the new account" and stated - "Can the customer hear me?" The bank opened my new account and I was advised that my funds would be available in two days. That did not happen and the bank claimed that they did not know where the remaining balance of my account had gone. I made more than 10 calls to the bank and on 9/11 was told by the representative that I could pick up my cashier's check on 9/12 and that the bank made the decision to close my new account. Was it legal for BBVA Compass to hold my deposit on a closed account? My perception of them closing my account was retaliating against me for being upset with them holding my money for 12 days.
What I'm reading is that they subtracted the $85 you owe them and they're cutting you a cashier's check for the rest.
Ethically speaking, you owed them the money, they subtracted it and made you a check for the rest. Once you cash that check, nobody owes anyone anything in this equation. Sounds like they're in the clear.
Legally speaking, I have no idea, since I'm not a lawyer, but even if it was not legal, good luck getting the $85 back without spending far more in retaining a lawyer and fighting it in court. Even fighting it in small claims court will take more of your time than $85 is worth.
If it's your time that is the problem, 12 days is not horrible in banking terms. Yes, we're spoiled now by ACH transfers and same day deposit availability, but since you're retired, I'm sure if you think back you'll remember when it used to take two business weeks to clear a check...
TLDR; cancel future deposits to that bank, find a new bank, then forget this fiasco and get your revenge by enjoying your life.