The Consumer Financial Protection Bureau (CFPB) found that once many banks freeze accounts for suspicious activity, it can be difficult for consumers to regain access to their funds.
In many cases, financial institutions didn’t notify customers that their account had been blocked. In others, the banks notified their customers but failed to give them guidance on how to restore their accounts.
The CFPB also found instances where financial institutions stymied customers’ attempts to contact them by blocking calls from numbers associated with frozen accounts, or forwarding those calls to pre-recorded messages which didn’t offer solutions.
“These practices caused or were likely to cause substantial injury to consumers as those consumers were unable to access frozen funds for weeks or months,” the CFPB wrote. “In these instances, this injury was not reasonably avoidable as consumers would not have reason to believe their account activity would trigger a freeze. Additionally, institutions deprived consumers of the information needed to address the account suspensions.”
Extreme Countermeasures
There is no doubt that fraud poses a real threat to banks and credit unions that costs them millions each year. Criminals now have more advanced technology, and they are using creative methods to defraud institutions, including ransomware attacks, phishing, and deepfakes.
It’s estimated that the average extortion demand per ransomware attack is over $5.2 million, and credit unions have been increasingly targeted in recent months. In response, many banks have taken extreme countermeasures to protect their customers. Unfortunately, stringent prevention methods can lead to false positives and frozen accounts, which greatly inconvenience those customers.
Clear Guidance
To improve that experience, the CFPB recommended that institutions enhance their systems to give customers automatic notifications if their account is frozen. If a customer’s account is blocked, institutions should also give customers clear guidance on the next steps and provide a channel for users to contact the bank directly and address disputes.
Separately, the CFPB found that many banks still charge customers to retrieve basic account information like balance inquiries, statements, and printed check images. Banks and credit unions are prohibited by law from creating any barriers for customers who request basic banking information.