How long can my bank freeze my account for investigation?

Until your bank account gets frozen, logging into online banking and seeing your balance might feel like something you take for granted. Banks usually make sure you have plenty of notice when they are updating their systems and getting into your account is typically only interrupted late at night during software updates. Access to your money seems like a given the rest of the time. But what happens if you try to log on, and your bank says your account has been frozen?

How long can the freeze last?

Under 12 CFR Part 1005 (Regulation E), Section 1005.11, financial institutions are required to investigate and resolve electronic fund transfer errors within specific timeframes. Upon receiving notice of an error from a consumer, the institution must investigate the alleged error, determine whether an error occurred, and report the results of the investigation to the consumer within ten business days. If the institution is unable to complete its investigation within this period, it may provisionally credit the consumer's account for the amount of the alleged error, provided the investigation is concluded within forty-five days of receiving the notice of error. § 1005.11 Procedures for resolving errors., Nero v. Uphold HQ Inc., 688 F. Supp. 3d 134, In re Bank of Am. Cal. Unemployment Benefits Litig., 674 F. Supp. 3d 884.

Additionally, the financial institution may require the consumer to provide written confirmation of the error within ten business days of an oral notice. If such confirmation is required, the institution must inform the consumer of this requirement and provide the address for submitting the confirmation at the time of the oral notification

§ 1005.11 Procedures for resolving errors.. These timeframes ensure that consumers are promptly informed of the resolution of their claims while allowing financial institutions sufficient time to conduct a thorough investigation.

Under federal law, the duration for which a bank can freeze an account to investigate fraud is not explicitly defined in terms of a specific time limit. However, banks are generally allowed to freeze accounts if they suspect irregular, unauthorized, or unlawful activities, as long as the freeze is necessary to complete their investigation. For example, in Mohamed v. Bank of Am., N.A., 771 F. Supp. 3d 695, the court noted that the contractual agreement between the bank and the account holder did not define what constitutes a "reasonable" amount of time for a freeze, but a 29-day freeze was deemed within the contractual timeframe for investigations. Mohamed v. Bank of Am., N.A., 771 F. Supp. 3d 695. Similarly, in Nix v. NASA Fed. Credit Union, 200 F. Supp. 3d 578, the court upheld the bank's right to freeze an account under its agreement when suspicious activity was detected, without specifying a maximum duration. Nix v. NASA Fed. Credit Union, 200 F. Supp. 3d 578.

Additionally, under federal regulations like 31 USCS § 5318, banks are required to comply with anti-money laundering programs and may freeze accounts as part of their compliance efforts, but no specific time limit is provided. 31 USCS § 5318, 31 USCS § 5318A.

Under the various relevant case law, the duration must align with the terms of the account agreement and be reasonable in the context of the investigation. Courts have generally upheld freezes as long as they are tied to legitimate suspicions and conducted within a reasonable timeframe.

The duration for which a bank can freeze an account for investigative purposes under California law depends on the specific legal authority under which the freeze is imposed.

Under Cal Gov Code § 7476, a court may order a financial institution to withhold notification to the customer for 30 days upon finding that such notice would impede a grand jury investigation. This withholding can be extended in additional 30-day increments until the end of the grand jury's term or the filing of a criminal complaint, provided the court makes the necessary findings for each extension. Cal Gov Code § 7476.

Cal Gov Code § 7480 allows for the sealing of financial records obtained through an ex parte application for 60 days, with the possibility of 60-day extensions. These extensions can continue for up to one year or until the investigation is terminated, whichever occurs sooner, upon a showing to the court that the extension is necessary for the investigation

Cal Gov Code § 7480.

Additionally, under Cal Gov Code § 7473, notification to the customer regarding the examination of financial records can be delayed for up to 90 days (two 30-day extensions after the initial 30 days) upon a showing of good cause. Further extensions, up to an additional 90 days, may be granted upon a showing of extreme necessity, making the maximum delay period 180 days. Cal Gov Code § 7473.

Banks in California can legally freeze an account to investigate suspected fraud for a limited period, depending on the circumstances and applicable laws. Under Cal Wel & Inst Code § 15630.2, if a financial institution delays a disbursement or transaction due to suspected financial abuse of an elder or dependent adult, the freeze can last up to 15 business days. This period may be extended to a maximum of 25 business days if requested by an adult protective services agency, local law enforcement, or the Department of Financial Protection and Innovation, unless terminated earlier by these entities or a court order. Additionally, a court may further extend the freeze or order other protective measures upon petition by relevant parties. Cal Wel & Inst Code § 15630.2.

In cases involving suspected fraudulent activities, banks may also cooperate with law enforcement or district attorneys under specific conditions. For example, law enforcement may request account information for a period of 30 days prior to and 30 days following the alleged fraudulent activity, provided they certify in writing that a crime report has been filed

People v. Muchmore, 92 Cal. App. 3d 32. However, banks are generally required to process transactions promptly and may face limitations on delaying transactions due to statutory deadlines and privacy concerns. Kurtz-Ahlers, LLC v. Bank of America, N.A., 48 Cal. App. 5th 952.

These statutes collectively indicate that the duration of a freeze or delay in notification depends on the specific circumstances of the investigation and the court's findings, with maximum timeframes varying based on the legal authority invoked.

The information contained in this website is provided for informational purposes only, and should not be construed as legal advice on any matter. Some of the information provided may have changed since publication.