When an Account Is Closed for Cause Would This Be the Start of an SOL for Reporting?

Millions of people each year have their bank accounts closed "for cause," which means the owner had a negative balance, such as taking out more money than he has in his account. If you are worried about when this account might leave your record, the day the bank closes does not necessarily start the Statute Of Limitations. The SOL starts with the date of the initial delinquency.

ChexSystems

The SOL for federal credit reporting starts on the date of the first major delinquency. Bank accounts closed for cause usually appear on a ChexSystems report. Normally, banks do not report account data to the credit bureaus so they use ChexSystems, which is like a credit reporting agency. As soon as the bank reports your account to ChexSystems, the SOL, which lasts five years, begins.

Credit Report

A delinquent bank account can appear on your credit report if the bank sells it to a collection agency or, although unlikely, reports the delinquency to the credit reporting bureaus itself. As soon as someone reports the delinquent bank account, the SOL on it starts. Delinquent accounts can appear on your credit report for seven-and-a-half years -- 180 days after the first major delinquency, plus seven years.

Restarting the SOL

If the bank sells the account to a collection agency, this does not restart the SOL, only the date of last activity. The date of last activity has no bearing on the SOL for reporting. However, the bank or collection could restart the statute of limitations if you negotiate a payment and then default on that agreement.

Tip

Ask your bank for overdraft protection services or to link your accounts together to stop negative balances. The fees for this service usually are less than a bounced-check charge and save your credit or ChexSystems rating. You could negotiate with the bank to pay off the balance due in return for the bank declaring the account an error. Watch your consumer credit report and ChexSystems report for the correct charge-off date. You receive one free report from each agency as long as you use Annual Credit Report or Consumer Debit.