An unsettling trend is emerging across the banking industry: Accounts are being abruptly closed, credit cards are shut down without warning and individuals find themselves stranded without access to their own funds.
What’s more alarming is that these actions aren’t necessarily targeting those engaged in illegal activities but are affecting regular people—small business owners, individuals receiving irregular income and loyal customers of banks.
Andrea Lawful Sanders, host of The Source on WURD Radio, delved into this issue with Rachael Hanible, a certified financial education instructor and founder of the Missing Piece Financial Group.
Examining the fine print is vital when signing up for a new bank account. “Your bank or your credit card can close your account for any reason that they deem necessary,” Hanible explained. This is stated in the terms and agreements users agree to when initially signing up with a new financial institution. When account holders don’t read the fine print, they become at the mercy of banking institutions, subject to their actions often without recourse or prior notice.
These sudden closures are most likely driven by the advent of sophisticated AI systems monitoring transactional behavior. “Now we have these systems that are basically studying your behavior, right? So for the most part, people do the same thing over and over again, every month when it comes to their banking transactions for the most part and it’s studying your transaction. So then if something happens, that’s unusual activity,” said Hanible. Scenarios where irregularities, such as sporadic large deposits, raise alarms within the AI systems despite being normal for certain businesses.
One critical and time-sensitive issue is delayed account reinstatement and fund release, especially when flagged for potential fraud. The wait faced by individuals trying to retrieve their money can be frustrating especially when nothing was wrong in the first place. “It can be something as small as you doing your mobile deposit from another phone that’s not your phone,” Hanible said. Reports of fraud from third-party companies or unusual activities could halt fund releases indefinitely, drawing out this process of waiting for money back even longer.
Account closures can have severe consequences for some. Individuals facing account closures without access to their own funds can experience credit score damage due to unforeseen pending fees.
“What are the guidelines for closing an account, even if you think you’re not at risk still, you need to know what that is – each institution has their own rules and they have their own computer that is programmed to their rules,” said Hanible.
One way to prevent being stuck in a situation where you can’t access funds is to split money across multiple banks. “We’re not talking about a lot of money when we’re talking about having multiple banks. We’re talking about $20, $50,” Hanible said. “Trust me, when you have nothing, that $20, that $50 is going to come in handy.” Another way to prevent this is to understand auto-pay commitments and their associated risks, taking a cautious approach to these modern conveniences.
“We just cannot afford to put all of our money in one place,” Hanible said. “We just can’t afford to do that.”
