When Checking Accounts Rise from the Dead

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If you close your bank account, don’t think that’s necessarily the last you’ll hear about it. In certain cases, closed checking accounts have re-opened when triggered by external charges, such as automatic bill payments.

This phenomenon is known as a “zombie bank account.”

In a recent case, a 78-year-old Air Force veteran named Richard Palmer passed away. In the course of tying up his affairs, his family closed his Bank of Americachecking account. Yet it was reactivated without their knowledge by automatic payments to two lenders.

The transactions went on for weeks before the family caught wind of the situation, and continued even after the bank had been notified. A representative finally solved the problem by taking the extreme step of initiating a phony withdrawal of $888,888.88. This triggered a fraud alert, which shut the account down for good.

The nonprofit organization Consumers Union conducted a study that found that Bank of America reserved the right to reopen closed accounts under certain circumstances. Nicole Nastacie, a spokeswoman for Bank of America, said that this was no longer the case.

“An incoming ACH [automated clearing house payment] item to a closed deposit account will not cause the account to re-open,” she said in an e-mail. “This policy has been in place since August.”

While the bank has discontinued the practice, it doesn’t guarantee that others have stopped also, which means that the risk of an account coming back to life may exist at other institutions.

According to Denis G. Kelly, CEO of the identity theft prevention service IDCuffs.com, an automatically re-opened bank account can have more dire consequences than simply incurring a few fees. It can present a ripe opportunity for criminals to profit from the bereaved.

“Identity thieves understand grieving families often overlook a loved one’s financial details, and they exploit this to their advantage,” he said. “By simply perusing the obituaries in the newspaper and collecting personal information easily accessible on the Internet, they have all the information necessary to take over accounts or open new accounts.”

Bob Welther, Assistant Vice President of Risk Consulting, at ACE Private Risk Services, gave recommendations for dealing with such an identity theft should it occur.

“You should immediately contact all your financial institutions involved to notify them of the fraudulent activity,” he said in an e-mail. “Also contact the three credit bureaus --- Equifax, Experian and TransUnion --- to place a fraud alert. Contact law enforcement, as well.”

Identity theft resulting from a reanimated bank account is a more widespread phenomenon than some people may realize. “There are 2.5 million deceased Americans yearly used to illegally apply for credit products and services,” Kelly said. However, he has found that banks and creditors will be reasonable in such circumstances.

“In the case of an account being re-opened for a deceased individual, most that are involved, including both the party attempting to collect payment and the financial institution, are very understanding,” Kelly said. “It will likely require documentation like a death certificate, and follow-through, but it is normally not a daunting task.”