This circular comes after the CFPB observed in complaints that even after a consumer completed all the required steps to close an account, their bank had “reopened” the closed account and assessed overdraft and nonsufficient funds fees.

Additionally, the CFPB received reports that financial institutions have also charged account maintenance fees upon reopening, even if the consumer was not required to pay account maintenance fees prior to account closure. Consumers may incur overdraft, nonsufficient funds, or monthly maintenance fees when a closed account is reopened by the bank.

This practice may also enable third parties to access a consumer’s funds without consent. If reopening the account overdraws the account, banks may also furnish negative information to consumer reporting companies if consumers do not settle negative balances quickly.

According to the CFPB, consumers often cannot reasonably avoid the risk of substantial injury caused by this practice because they cannot control a third party’s attempt to debit or deposit money, the process and timing of account closure, or the terms of deposit account agreements.

The CFPB previously ordered USAA Federal Savings Bank to pay more than $15 million in consumer remediation and penalties for, among other things, violating the Consumer Financial Protection Act by reopening deposit accounts consumers had previously closed without seeking prior authorisation or providing adequate notice.

“When a bank unilaterally chooses to open an account in someone’s name after they have already closed it, this is a fake account,” said CFPB director Rohit Chopra. “The CFPB is acting on all fronts to halt the harvesting of illegal junk fees.”