Senate Bill S9757

                                 
BILL NUMBER: S9757

SPONSOR: SANDERS
 
TITLE OF BILL:

An act to amend the banking law, in relation to establishing criteria
for the closure of banking accounts in the state of New York

 
PURPOSE OR GENERAL IDEA OF BILL:

To give bank account customers notification on why their personal or
business bank account is closed by a bank and to ensure their checks are
honored and funds are returned.

 
SUMMARY OF PROVISIONS:

Section 1 amends the Banking Law by adding a new section 9-11, which
states that all banking organizations and out-of-state state banks
authorized to operate and maintain branches pursuant to article 5-c of
this chapter when closing the account of a customer shall:

(a) Provide 60 days' notice that such account is being closed, whether
              

for personal or business use, and provide the reason for such closure;
unless preempted by any federal law.

(b) Return any remaining funds from such account within 60 days after
the closure to such account to the owner.

Section 2 sets forth the effective date which is immediately.

 
JUSTIFICATION:

Last year, 1.5 million bank customers had their checking or savings
accounts closed without prior notice-and for no apparent reason.  Under
the guise of "suspicious activity," banks are closing accounts more out
of fear of upsetting regulators than actual proof of laundering and
other illegal activities. These unexpected account closings can wreak
havoc with one's credit rating, cause checks to bounce and create other
problems that did not exist before.

Due to these unexpected bank account closings, individuals and busi-
nesses have had their reputations, which took years to build in their
local community, severely damaged..

Unexpected bank account closings causes businesses to bounce checks to
employees and suppliers, which in turn causes the recipients of these
checks to bounce their own checks.

By giving adequate notice, account owners will have sufficient time to
make arrangements with another bank, avoiding disruptions to their
financial well-being and to those they deal with.

This bill will help address problems from unexpected bank account clos-
ings.

 
PRIOR LEGISLATIVE HISTORY:

None. New bill.

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately