CFPB Calls Reopening Closed Consumer Accounts to Process Transactions "Unfair Practice"

The CFPB concluded that the unilateral reopening of an account by a financial institution after the consumer closed the account could constitute an "unfair act or practice."

In a CFPB Circular, published in the Federal Register, the CFPB supplemented previous guidance on whether it would constitute an "unfair act or practice" under the Consumer Financial Protection Act ("CFPA") if a financial institution unilaterally reopens an account, previously closed by a consumer, in order to process a debit (i.e., withdrawal, ACH transaction or check) or deposit.

The CFPB stated that in addition to potentially violating the CFPA, unilaterally reopening an account "may impose substantial injury on consumers that that they cannot reasonably avoid and that is not outweighed by countervailing benefits to consumers or competition."