The bank froze my account. There’s no way that’s legal, is there?

One hundred dollar bill frozen in ice
We’re really hammering the winter theme on this blog.

This is a question that we get more often than you’d think. And we can only imagine how frustrating it must be to lose access to your bank account–especially if you have direct deposit and use that account to pay your bills.

Unfortunately, there’s not a quick answer. Whether a freeze on your account is legal will depend on a bunch of factors:

  1. Did the freeze result from a court order or law-enforcement activity?
  2. Did the bank provide any explanation for the freeze?
  3. How long has the account been frozen?
  4. What does your account agreement say about the bank’s right to freeze accounts? The freeze may be a breach of contract. Even if the account agreement purports to let the bank freeze your account under certain circumstances, that authority may be limited by the bank’s duty of good faith and fair dealing, or its responsibility under other laws. For example, improperly freezing an account could constitute conversion or unjust enrichment.
  5. Did the bank bounce one of your checks? If so, and if the freeze was improper, then the bank may have wrongfully dishonored a check that was properly payable.
  6. Did the bank decline a withdrawal via ATM or debit card? If so, it may have violated the Electronic Fund Transfer Act, 15 U.S.C. § 1693 (assuming that the failure to transfer funds as directed constitutes “an incorrect transfer to or from the consumer’s account” under the Act). The Electronic Fund Transfer Act establishes a lot of protections for consumers, including procedures and time limits for resolving mistakes like this.

For more detail on these points, see Lauren K. Saunders, Margot Saunders & Cathy Lesser Mansfield, Consumer Banking & Payments Law § 4.5.13 (2018).

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