Bank closed old account for overdraft. How much will this affect me?

May 14, 2013 6:29 PM

An old (free) checking account in another state started becoming inconvenient (no local locations and bad phone service), so I moved my direct deposit elsewhere. I left a little money in the account, thinking having an older account would help with credit. I recently found out, however, that several months ago, they closed down the free checking service and switched to a fee checking service. While this was happening, it eventually drained the money out of the checking account and went negative. They apparently also closed the account for overdrafting, How badly is this going to affect my credit? Can I take any steps to mitigate it?

Additional details:

- I found this out by logging into my web banking, only to find that there was no actual statement whatsoever, so I have no idea how and when this actually even took place. I'm actually assuming on the fees, since I was looking around at what their accounts currently offer. The checking account is just gone.
- There was also a savings account attached, that was supposed to have overdraft protection on it. The savings account has a minimal sum still left in it and is still existing.
- There is an online notification saying that my billpay has been closed since the account was closed for overdraft.

Additional question:
- How to find out what actually happened?
- Is there any way I can dispute this with the bank?
- Will this affect any other things besides credit score? (Ie future bank accounts, obtaining a mortgage, background checks, etc)

posted by anonymous to Work & Money (11 answers total)

I walked away from a checking account (Washington Mutual) because I was overdrawn by about $3 and they kept charging me 25$ a day overdraft fees. After hitting a 150$ limit of maximum fees charged the account sat for about 5 years. I went to a local bank and maintained a never overdrawn account for those 5 years. When local bank was purchased by Bank of the West I got a notice saying I had 30 days to remove my funds because the bank did not want my business because of the balance due to WaMu. When I tried to open accounts with other banks and local credit unions they all cited the outstanding fees existing on the old unused account and told me they could not accept me as a customer. I eventually ended up with a BofA who told me "5 years ago? Why would anyone care about that?"

I got the impression banks like to "have each other's backs" and it can cause headaches for certain.
posted by M Edward at 6:42 PM on May 14, 2013

Start by calling the bank. Explain the situation and ask for the charges to all be removed, the account closed, and your credit report repaired. It probably won't work, but it certainly can't hurt. If it doesn't, ask for written proof of you agreeing for them to charge you money.

Get a free copy of your credit reports from www.annualcreditreport.com
When you do, they provide a method to dispute charges. The bank will have to provide information on what they charged you for, or it will be removed (theoretically).
posted by flimflam at 7:27 PM on May 14, 2013 [2 favorites]

It seems like they should have notified you that these things were going on before your account ended up getting closed. I would definitely follow flimflam's advice.
posted by limeonaire at 8:15 PM on May 14, 2013

The only way this would hurt your actual credit report (as in, big 3) would be if the bank actually sent your overdrawn account to a third party collections agency, and that agency put the collection account on your credit report. This isn't very likely. The bank still has your current contact info, no? If yes, you would know if someone was looking to collect.

As the savings account still exists and has a positive balance, what probably happened is they simply closed it when nothing was left and it stayed idle (and slightly overdrawn) for a month or two. It's not likely they're going to go after you for the fees, nor did they probably try. Follow flimflam's advice and get a free report copy from all 3 bureaus if you're concerned. If nothing else it's a good idea anyway.

Having said that, there are third party systems out there that track negative activity specifically on checking accounts, and many banks use the same service. I believe 'ChexSystems' used to be popular here in MN, if it's not still in use. Many years ago - when I was young and stupid - I overdrew accounts more than once. It took about a year before the average bank would allow me to open a new checking account after having one closed on me due to overdrafts. It's possible, depending on how long ago it was closed, that this may be a bump in the road to a new checking account, but if it is, you should be given information about the entity that is reporting the bad account info on you and you can call them and discuss it.

You can certainly call the bank and see what happened. Depending on the amount, if it's under $100 or so and they still internally show you as owing the money, if you're polite and explain the situation they'll probably just write it off. There's not much point in trying to get your original money back though; they more than likely sent messages, fliers in the statements, etc. to notify you of the new fee checking. I wouldn't worry too much about other adverse effects, though.
posted by SquidLips at 8:27 PM on May 14, 2013

Most banks use ChexSystems when deciding to give you a checking account which lists things like closures after overdraft. Typically, that type of info want show up on your credit reports from Trans Union, Equifax, or Experian so your credit score for obtaining credit won't be affected (unless in the rare case they decide to haul you into collections for an line of credit). However, you pretty much won't be able to open a new checking or savings account until any money you may owe your old bank is paid (or you wait it out). ChexSystems isn't part of the annualcreditreport.com set up for credit bureaus but at the link above you can order your report from them and see what your bank reported.
posted by birdherder at 8:28 PM on May 14, 2013 [1 favorite]

This happened to me. We left an account open to reap our "reward points", which we actually never did. The account started getting charged monthly, then overdrafted, then got closed and sent to a collection agency. We finally just paid the collection agency out of frustration, and have since gone on to purchase two houses. It's not going to destroy you. Also, if they had sent it to a collection agency, you'd probably already know via rude phone calls or mail. My guess is they just closed the account...which is actually more generous than most banks. I'd call the bank and find out what the situation is.
posted by fyrebelley at 9:53 PM on May 14, 2013

Didn't you get monthly statements saying if fees were being charged? Or doesn't the bank have your current address?

Okay, first thing to do is contact the bank, and find out exactly WHY the account was closed: maybe it WAS fees, but also maybe the bank considers the account 'abandoned' --- how long has it been since you last used that account, that it had ANY deposits or withdrawals? If it was fees, you've probably got no chance of getting the money back; just make sure the account is closed and move on. If the account was closed as abandoned, you MIGHT have a chance.... maybe. Either way though, start with contacting the bank.
posted by easily confused at 2:36 AM on May 15, 2013

Double check with the bank to see if they ave the correct address on file. If so, request the dates that they sent you the notices about the overdraft. If they say that they didn't send them or can't provide dates, perhaps they will be more likely to waive the overdraft fees.

I had an account years ago that was negative and subsequently closed. I went to open an account in a credit union and they used ChexSystems. When they ran my info, they saw the previous bank and what I owed. All I had to do was run to the bank and settle the balance, and when I got a receipt from that I was able to open an account. It didn't affect me any other way, including my credit score.
posted by andariel at 3:37 AM on May 15, 2013

Call the bank and speak to someone in customer service. Be contrite. Ask them if they can help because you don't want to have problems with other banks.

Usually you'll get a human who will help you.
posted by Ruthless Bunny at 5:55 AM on May 15, 2013

They cannot change the type of account you have without notifying you. (Of course this doesn't mean they didn't do it anyway.) Recently Fifth Third closed its free checking, but they called me several times AND sent several notices in the mail, for a couple months leading up to the change. Are you sure they didn't send you any notifications?

Call the bank and request any paperwork associated with the account change and all the activity that led to the closure. Once you have the actual information, you can go about letting them know you weren't notified about the change or charges, and request the charges be removed. Often with little hassle they will remove most of the charges. If not, request a supervisor and ask again. Then close those accounts and file away the final statements just in case.
posted by Glinn at 9:19 AM on May 15, 2013

"Notification" can come in the form of a little paragraph tacked on to the end of your monthly statement.

Now that it's the new modern world, you can have your monthly statement e-mailed to you, which of course they pressure you to do.

In the end, you were probably notified in some manner that conveniently allows the bank to claim they notified you, without your actually having received or read the notice.
posted by jgreco at 9:38 AM on May 15, 2013