OBSI's approach to account closure or relationship-ended complaints
Sometimes banks decide to end their business relationship with a consumer and close the consumer's accounts. When that happens, consumers often feel they were treated unfairly. They may feel they deserve an explanation and did not get one or that they were not given enough time to transfer their accounts.
When can a bank close a consumer's account?
In general, banks are allowed to end their business relationships with their customers. In some unusual situations, they are required to do so. When this happens, the consumer will be given notice that their accounts with the bank will be closed and they have to transfer their money to another bank. In some rare situations, the bank does not give notice and just closes the accounts and sends the consumer's money to them.
Usually, banks give consumers reasonable notice of account closures. This notice is typically 30 days. This is to give the consumer time to transfer accounts to another bank. Usually, the notice is made in writing. It is sent to the email and/or mailing address the bank has on file. Consumers are responsible for notifying their bank of any change to their contact information.
Banks are not required to explain the reason for an account closure and they generally don't. Some account agreements will list reasons why an account may be closed, such as:
- if the account is overdrawn, or
- if the bank suspects the account is being used for improper use
Most account agreements state the bank can close the account without giving a reason.
Our approach
Generally, if the bank provides the consumer the notice required in the account agreement or reasonable notice, we do not recommend compensation. This is because the bank is entitled to end its business relationship with a consumer. When we consider what reasonable notice is in a case, we will look at whether there was a special situation that warranted more notice or flexibility. We may also investigate if the bank's decision to close the account was:
- biased
- in keeping with its policies and procedures
- carried out in a fair manner given the consumer's situation
Usually, we find banks have given reasonable notice. In rare cases, we may recommend a refund of fees or compensation if not enough notice was given.
We are not able to challenge or change a bank's decision. We are also generally not able to tell the consumer the bank's reason for account closure.
Consumer tips for handling an account closure
It can be very upsetting when your bank decides to close your accounts. Remember that the bank is a business and its decisions are not personal. You usually will not be able to find out the bank's reasons. But there are things you can do, including:
Tip #1: Search for a new bank immediately.
As soon as you receive notice of the account closure, start your search for a new bank. It is your responsibility to open a new account elsewhere quickly. This is important so you don't miss payments or get charged fees that you could have avoided.
Tip #2: Take inventory of your account activity.
Create a list of regular transactions that will be impacted by the closure of your account, such as:
- pre-authorized debits, monthly bill payments and automatic subscription or membership renewals
- loan repayments
- direct deposits of pay or retirement income, investment dividends and government benefits
- GIC renewals
- post-dated cheques
- scheduled gifts to charities
Identify all the organizations that initiate these transactions. Provide information about your new account to them as soon as possible. Again, this will help to avoid disruptions, unnecessary fees or penalties for missed payments.
Tip #3: Communicate any special circumstances to your bank.
Do you have any issues that mean you need extra notice or flexibility during the account closure process? In certain situations, it could reasonably take more than 30 days to complete an account closure, for example if the account is:
- registered (e.g. TFSA, RRSP, RRIF, RESP)
- maintained for business-related purposes
- a loan that must be repaid
- a term loan that has not yet reached its expiry date
- holding a non-redeemable proprietary GIC that cannot be transferred until its maturity date
If you have these kinds of issues, contact your bank to explain why you need more time to close the account. Tell them how much additional time you need. In some circumstances, the bank may decide to be flexible.