Customers sometimes complain to us that their bank refuses to release money in an old passbook account they believe has never been closed or paid out. The same goes for paying out funds on old term deposit certificates (see below).

Such passbooks are rarely used today, but were once common. Account holders would present their passport-like booklet at a branch to make deposits and withdrawals. These transactions, plus interest earned, were recorded in the passbook, kept by the account holder. Banks didn't issue statements for such accounts, so the passbook was the customer's sole record. A replacement would be issued if the customer lost the passbook.

When we get passbook complaints, the last known deposit in the account, or the last evidence of its operation, usually dates back many years. In most cases, the bank says it has no record of the account or the claimed funds. Sometimes, a customer may locate an old passbook that appears to show unwithdrawn funds, or a customer may claim to have found evidence of a term deposit that has never been paid out.

Whether we can help will depend on the amount of time that has passed, and the information we can establish about the account.

Our approach

As an “on demand” account, the balance must by paid out by a bank whenever a customer asks. We can investigate complaints about a bank's refusal to pay out the balance, even if the last transaction in the passbook dates back many years. Crucially, however, that last entry is not necessarily the current balance, but rather the balance on that particular date. The reasons are explained below.

Given the time that has often elapsed, we can find it very difficult to establish much more. Mostly, our investigation is limited to checking whether a bank has carried out a proper search for the passbook account. Banks are legally required to hold transaction information for seven years, although they often hold it longer. We expect a search to cover all relevant records it holds.

When a bank claims to have no record of an account, we consider various possibilities, including whether:

  • the bank may still hold the funds, but hasn’t looked properly for the account
  • the account may have been changed many years earlier into another type of account such as a statement account, and the passbook is no longer used to record transactions
  • the account holder withdrew the funds and/or closed the account without presenting the passbook and, given the time that has passed, has forgotten that this happened
  • the passbook was lost many years previously and a replacement passbook was issued
  • the credit balance was used up by fees, and the account was closed by the bank as an inoperative or dormant account
  • the account was wrongly closed by the bank and the funds retained
  • the funds were paid to the Inland Revenue Department’s unclaimed money fund. Money in bank accounts over $100 becomes “unclaimed” and must be transferred to this fund if the account holder has not operated the account for a certain period of time. Inland Revenue keeps a record of such funds.

Most of these possibilities can explain why a final entry in a passbook does not represent a current balance available for withdrawal.

We are unlikely to be able to help a complainant if we are satisfied the bank has carried out a proper search and holds no record of the passbook, and its record-keeping complies with its internal procedures and legal obligations.

Old term deposit certificates

These are a type of savings account that pays a fixed interest rate until an agreed maturity date. When a customer opens a term deposit, he or she typically receives a term deposit certificate specifying the amount deposited, interest rate and investment term.

Sometimes people uncover old term deposit certificates when moving house or sorting through a deceased relative's belongings. They have no recollection of receiving the funds at the maturity date, and the bank refuses to pay out on the certificate when they present it.

Limitations

We have certain limitations on our ability to investigate complaints about distant matters.

We cannot look at complaints relating to something that happened before a bank joined our scheme. Most banks joined on 1 January 1992. If the term deposit shows a maturity date before that date, it's unlikely we can help.

If the maturity date is after that date, but it is more than six years since the complainant should reasonably have become aware of a problem with the term deposit, it is also unlikely we can help. If neither of these exclusions applies, we can consider the complaint.

Approach

Our approach, however, is different to the one we apply to old passbook complaints. We assume the bank paid the funds to the customer on the date of maturity because there is ordinarily nothing to assume to the contrary.

Even so, we still ask a bank to conduct the usual checks for evidence of a term deposit or what happened to it on maturity. It may be possible to establish whether the bank put the money in another account. We can do little, however, if no evidence emerges of what happened to the funds after maturity, and no evidence exists of the funds beyond the certificate.

The last entry in the passbook is the balance of the account on that particular date and not necessarily the current balance.

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Deceased customers' accounts

A bank will freeze a deceased customer’s individual accounts when notified of the death. This includes transactional accounts, term deposits, credit cards and loans.

Banks won’t necessarily know that a customer has died. Indeed, it is more likely – and should be assumed – they don’t know. Therefore, it is important to notify the bank as soon as possible. Anyone can notify the bank but typically this responsibility would fall on the next of kin or the estate representatives. The bank may ask for identification from the person notifying the bank as well as a copy of the death certificate.

Instructions

A bank can take instructions about a deceased person’s accounts only from someone authorised to act on behalf of the deceased’s estate. As well, it can give information about the accounts only to those entitled to request it. That’s because a bank’s duty of confidence to customers does not end with their death. (See also our guide on privacy and confidentiality.) This means next of kin and estate beneficiaries cannot give instructions to a bank or require a bank to give them information about a deceased person’s bank account. It also means we can rarely look into complaints about a deceased customer’s accounts from anyone other than the executor or administrator of the estate.

The legal process is usually to obtain probate or letters of administration from the High Court. This allows executors or administrators to deal with the deceased’s property, including his or her bank accounts.

Having obtained probate or letters of administration, an executor or administrator will typically set up an account called “the estate of [deceased’s name]”. The bank will then transfer funds from the deceased customer’s accounts to the estate account before closing the individual’s accounts. The executor will distribute funds from the estate account according to the terms of the will and then close the estate account.

If the deceased has no will and the estate is worth less than $15,000, the bank may forward money in the deceased’s accounts to his or her next of kin. But the bank must be satisfied the person is dead and that no application has been made to the High Court to administer the estate. In such circumstances, the bank will probably want to see a copy of the deceased’s death certificate and information about the next of kin. Even then, the next of kin may not necessarily be entitled to information about the deceased’s accounts, and may have to seek letters of administration from the court in order to access that information.  

Signing authorities

When a customer dies, all signing authorities on that person’s accounts and any power of attorney authority are no longer valid. Signing authorities allow a person to operate an account in the name of another person despite not owning the funds. A power of attorney is a wider power and enables someone to act on behalf of another person in specific areas or in all matters.

Joint accounts

If a deceased customer had a joint personal account, the account will usually be transferred into the remaining account holder’s name, or names if there is more than one. This step will be more complicated if there is debt (particularly a loan secured by a mortgage over a property).

To learn more about estates, we suggest you talk to your bank or lawyer. See also our guides on account mandates and power of attorney.

Complainants

Our rules require us to look only at complaints from those who received the financial service about which they are complaining. When someone dies and the High Court grants probate or letters of administration, the executor of the will or administrator of the estate becomes the deceased’s representative and can make a complaint on his or her behalf. We cannot look at complaints if probate or letters of administration are pending or have not yet been sought. Nor can we consider complaints from next of kin or estate beneficiaries if these documents have been granted (unless the executor or administrator agrees).

In some limited circumstances, we may be able to consider a complaint from next of kin or estate beneficiaries if the estate is worth less than $15,000 and the High Court granted no document.

Children's accounts

Children don’t have unrestricted use of bank accounts. Nor are they free to open bank accounts on their own. To do that, they need an adult’s involvement. The role of adults (usually the parents) is to decide what type of account would be best for the child. They also decide who can have access to the account.

The rules governing who can operate an account are set out in a document called an account mandate (also known as an account signing authority). An account mandate spells out who has access to an account and how that access will work. Parents may decide they alone will have access to the account. Or they may decide to operate the account jointly with the child. Or they may choose to give the child (depending on age) sole access.

We sometimes receive complaints from parents concerned that their child has been able to access an account without their knowledge or authority. We also receive complaints from one parent that the other (usually estranged) parent is operating their child’s account in a way the first parent does not approve of. In such cases, we check the account mandate because it records the parent or parents’ intentions at the time of the account’s opening about how the account is to be used.

Understanding clearly who has signing authority is vital to avoid a child or parent operating an account (or spending the funds in it) in a way that is contrary to everyone’s expectations at the time the account was opened. 

Types of children’s accounts

Banks offer accounts geared specifically to children (Children are deemed minors until the age of 18, when they become adults). Such accounts have different restrictions about control of the account. The restrictions are usually related to a child’s age.

A parent will generally operate an account for a very young child (say, under seven). As the child gets older, the bank’s terms and conditions usually allow a wider range of activities, such as making withdrawals, setting up internet banking and getting a debit card. Children closer to adult age typically can open and manage their own savings accounts, do internet and phone banking and use ATMs to access their accounts.

Parents can also open a standard savings account in a child’s name, but with themselves as sole signatories of the account. They can also open an account, with themselves and the child as joint account holders. Finally, they can even open what is, in effect, a kind of trust account: an account in their names (allowing them full access to the funds in it), but on the understanding those funds are to be used for the benefit of the child. 

Banks' obligations

Banks must give accurate – and sufficient – information to parents about the types of children’s account they offer so parents can make an informed decision about which type of account will best suit their needs.

Banks have the same obligations to under-18 customers as they do to adult customers: they must be fair and reasonable in their dealings and must act on customers’ instructions in accordance with the account mandate. 

Ownership of money in a child’s account

In general, the account holder owns the funds in an account. Therefore:

  • If an account is in a child’s name, the child owns the funds.
  • If a parent and a child are joint account holders, the parent and child are joint owners of the funds.
  • If a parent is a signatory to an account, but not an account holder, the parent does not own the money (although he or she has control over how the account is operated while still a signatory).
  • A child who is the sole account holder can, on reaching 18, change or remove the signatories and operate the account alone. 

Complaints about children’s accounts

Most complaints we receive are about who controls or has access to accounts. Typical complaints include: 

  • A parent has asked a bank to set up a children’s account in a way that prevents a child from accessing the account on his or her own, but the child has nonetheless been able to withdraw money.
  • A bank has not given a parent good advice about the best way to set up a children’s account, and the child or other parent has used the funds in the account for purposes other than those the first parent had in mind when setting up the account.
  • A bank has allowed one parent, following a relationship breakdown, to remove the other parent from the account mandate, or withdraw the money in the child’s account, or close the account.

When parents complain that, contrary to their intentions, a child has been able to access an account and spend the money in it, the problem is usually either that:

  • the account mandate was set up to allow the parents or the child to operate the account – a fact the parents were unaware of or had forgotten, or
  • the bank failed to set up the account properly or allowed withdrawals to be made contrary to the account mandate. 

In looking into such complaints, we check:

  • the information the parents gave the bank when setting up the account
  • the account’s terms and conditions
  • the account mandate. 

(We conduct the same checks when one parent complains that the other has withdrawn funds from a child’s account or closed the account.)

Sometimes we will find that a bank set up an account that did not correspond with what the parents said they needed.

Compensation

Parents sometimes regard funds withdrawn and spent by a child contrary to their wishes as “lost” money, and they seek full reimbursement. However, we do not necessarily regard money spent by a child as a loss if the account is in the child’s name. In depositing money into the child’s account, the child becomes the owner of the funds.

There are, however, situations where we may find that the money spent by a child is a loss.  For example, when:

  • The bank did not set up the account appropriately.
  • The child is the account owner, but is not authorised to operate it.
  • The parents told the bank they were putting their own money into the child’s account.
  • The money was to be used for a specific purpose. 

In addition, we can consider compensation for any stress and inconvenience the parents suffer from receiving inadequate or incorrect advice from the bank when the account was set up. 

Closing accounts

A bank can end its relationship with a customer at any time, just as a customer can move to another bank at any time. A customer may move because a competitor offers a better deal or because the relationship with the bank is unsatisfactory or has broken down. A bank may decide to close a customer’s account because of how that person has been operating it, or because the bank also feels the relationship has broken down. Banks are under no obligation to continue doing business with a person or company, but they should not close an account without good reason.

The process

Generally, a bank should not close your account without giving reasonable notice, which typically means giving you enough time to make alternative banking arrangements.

The Code of Banking Practice says a bank will not normally close a customer’s account until it has provided at least 14 days’ notice.

In some limited circumstances, however, a bank can close your account without giving you any notice. These may include:

  • if a bank is complying with a court order
  • if you have acted illegally
  • if you have breached the bank’s terms and conditions
  • if you have acted abusively towards bank staff.

A bank does not have to explain why it is closing a customer's account, although in most cases banks follow good practice and give a reason. This gives the customer an opportunity to respond if the bank has misunderstood the facts of a situation or made a mistake.

A bank must return all the money in a customer's account at the time it closes the account, less any interest or fees that apply. A bank normally does this by sending a cheque to the last known address.

How we look at closure complaints

Complaints about a bank closing an account usually involve a customer challenging the bank’s reasons for doing so. Two of the most common reasons why a bank closes an account are:

  • the customer has used the account inappropriately – for example, the account is continually going into unarranged overdraft
  • the customer has abused a staff member in some way, either verbally or physically.

In the first situation, it can be costly for a bank to monitor an account that is in overdraft. Therefore, a bank may decide that it does not wish to continue to offer this facility to a customer.

In the second situation, a bank has a duty as a good employer to protect its staff from abuse and violence. In these circumstances, we would expect a senior member of the bank who was not subjected to the abuse to make the decision to close the account.

Most people who complain to us about their account being closed want us to either stop the bank from closing their account or to get the bank to reopen their account. However, although we can award compensation for direct loss or inconvenience if we find some wrongdoing in the way the bank closed the account, we cannot require a bank to stop the closure of an account or reopen one.

If a complaint is solely about a bank's decision to close an account, and there are no concerns about how it was done (such as if the bank failed to give adequate notice), then it is unlikely we will investigate.

Occasionally we receive complaints about account closures which are related to anti-money laundering legislation. For more information on this, see our Quick Guide on Anti-Money laundering.

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