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Closed Account, but Bank Reopened It: Legal?
I closed my bank account on 8/01/08. I even have the online copy of the check where I closed it, marked 'Closed account'. I went to my auto insurance company to advise them that I had closed the bank account and to stop the draft. The other day I got a letter stating that I had overdraft fees of $225 on the account. It seems the insurance company sent a draft on 8/21/08 and the bank reopened the account and honored it instead of just sending it back as 'Closed account'. How can they possibly reopen my account without my knowledge. Is this legal?
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 You have omitted a key piece of information. Did you actually take your annotated check to the bank and separately tell the bank you were closing the account, in which case the bank would know of your intent, or did you simply assume that the notice on the check was enough? It would not have been, since banks rarely do a physical review of the checks they pay.
If you kept your insurance coverage in place and gave the insurance company a different payment instruction, to charge a different account, for example, or made other payment arrangements, you may be able to have your bank return the 8/21/08 draft, depending on how it was presented to the bank (via automated clearinghouse debit or unsigned paper draft). Check with the bank, and tell them that the draft was not authorized. You may be entitled to a refund of fees, too.
You probably will not be entitled to reimbursement for the draft amount if the insurance company simply failed to change the account it drafted from until September. You got coverage from them and you had to pay for it one way or another, but the insurance company might owe you for your overdraft fees for charging the wrong account.
If you canceled the insurance altogether and the insurance company simply failed to stop its drafting of your account, you may also be able to get reimbursement from your bank. Here also, you should inform the bank that you did not authorize the transaction.
Published on BankingQuestions.com 11/05/08
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