Bank follow-up missing after it froze accounts

Categories:
Freezing an account
Summary:
Kiri was treasurer of a committee supervised by a trust. There was a disagreement between trustees and committee members about whether the trustees were entitled to access financial information held by the committee. One trustee, Tony, approached the committee’s bank for statements and documents about committee accounts. Tony and a former trustee also expressed concern to the bank about the way the committee accounts were being operated.

As a result, the bank suspended the committee’s accounts. The bank also gave Tony and the former trustee committee account information. Four committee cheques were dishonoured after the accounts were suspended. The committee found out about the suspension when a creditor advised it about a dishonoured cheque. 

Kiri complained on behalf of the committee that the bank had acted wrongly in suspending the accounts and releasing information to non-signatories. She also complained that the bank failed to immediately advise the committee of the suspension or give a proper explanation for it.

Our investigation

We reviewed the trust and committee governance documents, which showed that the trust, as supervisory body, was entitled to access to the committee’s financial information. We also reviewed the terms and conditions of the accounts, which said the bank could suspend an account if there was a dispute about account operations. We were satisfied the bank could suspend the account in the circumstances. Furthermore, we considered the bank had subsequently provided the committee with a proper explanation for the suspension. 

The bank acknowledged three administrative failures:

  • It didn’t immediately advise the committee of its decision to freeze its accounts as required under the bank-customer contract and its own internal policy.
  • It didn’t give a timely explanation of the steps that needed to be taken to lift the suspension. 
  • It shouldn’t have provided information to the former trustee without first discussing the request with the committee.

The bank offered the committee $1,500 compensation to settle the complaint. We thought this was reasonable in the circumstances. The committee had been inconvenienced by the bank’s administrative failures, but the chief cause of disruption was the dispute between the trust and the committee.

Outcome

Kiri accepted the offer and the case was closed. 

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