What Is an Account Freeze?
An account freeze is an action taken by a bank or brokerage that prevents some transactions from occurring in the account. Typically, any open transactions will be canceled, and checks presented on a frozen account will not be honored. However, the account holder can still deposit money into the account.
Key Takeaways
- Account freezes prevent transactions from going through on a bank or brokerage account.
- Essentially, money can be deposited into the account but no money can leave the account.
- Account freezes can be put in place by an account holder (in the event of a lost or stolen debit card), or the bank or regulatory authority.
- The bank or regulatory authority may freeze an account because of suspicious activity, suspected criminal activity, civil actions, or liens.
Understanding an Account Freeze
Account freezes can also be initiated by either an account holder or a third party, such as a government, a regulatory authority, or a court order. Many banks and credit card providers are now offering the ability to freeze an account online. In the event of a lost or stolen card, a cardholder can quickly “freeze” the account.
A government or regulatory authority may freeze an account because of suspicious activity, suspected criminal activity, civil actions, or liens filed against the account. Furthermore, a bank or brokerage account may be frozen when the account holder dies. Once the appropriate documentation is presented, a new account will be opened in the beneficiary's name with access to the assets.
Account Freezes in Times of Political Unrest
Multinational enterprises run the risk of having foreign direct investment accounts frozen or more specifically "blocked" in international finance parlance. During times of political unrest, national governments may "block" foreign entities from withdrawing assets. As a form of transfer risk, national governments might use these discriminatory tactics when their central banks are running short of foreign exchange, for instance.
For example, on Feb. 22, 2022, President Joe Biden announced economic sanctions on Russia over its invasion of Ukraine. These sanctions included freezing the U.S. accounts of five Russian elites.
There are no universal set of standards or practices that outline the various reasons an account can be frozen. It often comes down to account type (or purpose), local and national regulations, or unfavorable political and economic sanctions and blowback.
How Do You Freeze a Bank Account?
You can freeze your bank account to prevent any debit transactions from clearing by logging into your online banking platform or mobile banking app (assuming your bank offers the option). Or you can contact customer service and request an account freeze.
Why Would a Bank Freeze an Account?
Banks can freeze an account for a variety of reasons, including suspicious or illegal activity, or unpaid debts due to creditors or governments. Banks may freeze accounts for using the account in a manner that goes against its policies.
How Long Can a Bank Freeze an Account for?
There is no set timeline that banks have before they have to unfreeze an account. Generally, for simpler situations or misunderstandings the freeze can last for seven-10 days. For more complicated situations, the bank may request detailed information and take 30 days or more to review and decide whether to unfreeze or close the account entirely.
The Bottom Line
Banks and brokerages have the ability to freeze a bank account for a variety of reasons. This is done to prevent transactions from going through on an account. Basically, funds can still be deposited into the account, but no money can leave the account. An account freeze can also be initiated by an account holder (in the event of a lost or stolen debit card) or a third party, such as a government, a regulatory authority, or a court order.
If you discover that your account has been frozen, you should contact your financial institution as soon as possible to find out the reasons for the freeze and what you need to do to have it lifted.
FAQs
Account freezes are not permanent but generally require the account holder to take certain actions before they can be lifted. The freeze is typically lifted once the person has made payment in full to clear an outstanding debt to a creditor or the government.
How long can a bank freeze your account for? ›
The time for which a bank may freeze an account depends on the reason for the decision. In the case of fraud prevention or suspected illegal activity, the account may be frozen indefinitely while the bank investigates.
How many days does it take to unfreeze an account? ›
For more complicated situations, the bank may request detailed information and take 30 days or more to review and decide whether to unfreeze or close the account entirely or release a portion of the funds to you—such as Social Security or other federal benefits.
How long can a bank freeze your account for an investigation? ›
The duration of a bank account freeze depends on the circ*mstances. Simple misunderstandings may be resolved in 7-10 days, while more complex scenarios could take 30 days or longer. In cases where the freeze is due to tax obligations or legal disputes, there's no set time limit.
How do I resolve a freeze account? ›
If your bank account was frozen due to defaulting on a loan repayment, once you have repaid the loan, you can request to reactivate it. If the freeze is due to suspected fraudulent activity, cooperate fully with any investigations conducted by the bank or relevant authorities.
Can I withdraw money from a freeze account? ›
When your Savings Account is frozen, it means that you are unable to withdraw funds from your account via the ATM or chequebook. You will be unable to transfer funds from or into your account. You will also be unable to leverage your Debit Card to make purchases from your account.
What is the bank account freeze rule? ›
Transparency: Banks are required to inform customers about the reason for freezing the account, unless restricted by law. Due Process: The freeze is usually temporary, and the customer has the right to know the expected duration. Banks should also inform customers about the process for getting the freeze lifted.
How do I get the bank to unfreeze my account? ›
Steps to unfreeze your account
- Contact your bank. Calling your bank is usually the quickest way to find out why your account is frozen and what you can do to regain access.
- Resolve the issue. You may be able to have your issue resolved quickly, depending on your situation. ...
- Stop payments. ...
- Get legal advice, if needed.
Key Takeaways. The Federal Reserve requires that a bank hold most checks for a reasonable period of time before crediting the customer's account. A "reasonable" period of time can range from two business days to up to six business days.
Can a frozen account still receive money? ›
Having your bank account frozen means that you can't withdraw or transfer money from your account or make scheduled payments. However, you can still receive deposits. Not to worry, the funds in your frozen bank account remain, unless further action is required.
You will not be able to make a bank transfer or withdraw funds from it. Your scheduled payments will also be put on hold. However, it's not entirely inaccessible, as you can still monitor and check your balance in a frozen bank account. This freeze can be court-ordered or initiated by the bank itself.
Can a bank freeze your account without notice? ›
If your bank has suspected that you used your account illegally, they can also close your account without any notice. It can also prevent you from doing business in the future. If, however, you are not doing an illegal activity, then you should contact your bank immediately to clear this up and remove the freeze.
How long does a bank freeze last? ›
Once your account is frozen, it goes into a holding period for about two to three weeks. During this time, the money is still in your account, but you're not able to access it. This gives you time to take action of your own, either settling with the creditor or counter-suing them.
How long will my account be under investigation? ›
A bank can freeze your account for the duration of the investigation, which can last from a few days to several months, depending on the case's complexity and the issues involved. Regulatory guidelines may set maximum durations for specific scenarios, but these can vary by jurisdiction and bank policy.
How long is a bank account flagged for? ›
If you've had banking problems, ChexSystems will alert other banks about them for up to five years. Opening new accounts could be tough. Prepaid cards or second-chance checking could help.
What is the downside of freezing your credit? ›
A freeze can give you a false sense of security — you may still be susceptible to credit fraud or other fraud involving your Social Security number. A credit freeze won't affect your current accounts, but if a thief steals the information on an existing account, your credit may be used without your permission.
How long does it take to get rid of a credit freeze? ›
Unfreeze requests: Online or by phone: agencies must lift the freeze within one hour. By mail: agencies must lift the freeze within three business days.
Can you still build credit with a freeze? ›
It's a smart decision to freeze your credit to restrict unauthorized access to your credit report or personal information, especially if you think you might be a victim of identity theft. Can you still build credit with a credit freeze? Yes, you can still build credit with a credit freeze.
How do I remove a hold on my bank account? ›
In many cases, you won't be able to do anything about a hold. However, your bank needs to follow federal regulations and justify any holds in your account, so they can't keep you from your money forever. If things go on for too long, contact the U.S. Consumer Financial Protection Bureau (CFPB) and file a complaint.
