Dormant Account Management

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Daniel Sclafani
Senior Auditor

What are four dreaded words in banking operations? Date - of - last - contact. Dormant accounts (i.e., accounts with no activity for a certain period of time) can prove challenging for banks, as employees need to contact each customer who has a dormant account for more information and to discuss possible reactivation. So what can your bank do to lessen the burden of dormant account tracking?

An exception to this rule would be New York banks that are federally chartered, as this particular law does not apply to them. (For a complete list of federally chartered banks, visit the OCC website: https://www.occ.treas.gov/topics/licensing/national-banks-fed-savings-assoc-lists/index-active-bank-lists.html).

To determine the potential dormant fee, first, review your bank’s fee schedule and website to determine which fees apply to savings accounts. These fees usually include minimum balance fees and/or monthly service fees. New York law specifically states that any fee for escheatment/unclaimed property does not apply, so you can exclude those from your review. Next, you will want to make sure that all the dormant fees are charged at a similar or lower rate than any of the savings fees on the fee schedule/website.

Regardless of location, the operations team should ensure that there is a process in place for tracking dormant accounts by reviewing your bank’s core processing system capabilities. The team should verify that the system adequately tracks customer contact from all avenues, including ATM transactions, online banking access, mobile banking, etc. If verbal contact with the dormant account customer is permitted in your state (e.g., it is in New Jersey, but not in New York), ensure that bank employees are documenting all verbal contact within the system. The documentation can be recorded within a customer’s account profile or with a digital note on a file maintenance report stating why the date of the last contact was updated. The date, time of contact, and method of contact should be included.

If you determine that your bank is not in compliance with applicable laws on dormant account fees, make sure that the fees are changed immediately. The consequences for non-compliance could include a hefty fine, as your bank could face penalties for each customer who was adversely affected by the bank’s error. This could even include conducting a look-back review to refund all affected customers.

While it would be nice for customers to be regularly active on all of their bank accounts, the truth is that dormant accounts are not going away anytime soon. Be sure that when customers do forget about their accounts that you are complying with the appropriate laws to reduce your bank’s risk of financial penalties.  

Daniel Sclafani,
Senior Auditor