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Can we charge a dormancy fee on any account that falls dormant, or are these fees only allowed if the account balance is over a certain amount? Our new processor told us we can charge a dormancy fee only if the account balance is over $10,000. – IBA Compliance Connection

IBA Compliance Connection

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Can we charge a dormancy fee on any account that falls dormant, or are these fees only allowed if the account balance is over a certain amount? Our new processor told us we can charge a dormancy fee only if the account balance is over $10,000.

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We are not aware of any law or regulation requiring a minimum account balance (such as $10,000) to charge a dormancy fee. Whether a bank is authorized to charge a fee on a dormant account depends on the terms of your deposit account agreement with the customer.

The Illinois RUUPA requires that dormancy fees be charged pursuant to a “valid contract [that] authorizes imposition of the charge for the apparent owner’s failure to claim property within a specified time.” Additionally, the account agreement must specify the time in which a dormancy fee will be charged, and dormancy fees must be “limited to an amount that is not unconscionable considering all relevant factors.”

For resources related to our guidance, please see:

  • Illinois RUUPA, 765 ILCS 1026/15-602(a) (“A holder may deduct a dormancy charge or an escheat fee from property required to be paid or delivered to the administrator if: (1) a valid contract between the holder and the apparent owner authorizes imposition of the charge for the apparent owner's failure to claim the property within a specified time; and (2) the holder regularly imposes the charge and regularly does not reverse or otherwise cancel the charge.”)
  • Illinois RUUPA, 765 ILCS 1026/15-602(b) (“The amount of the deduction under subsection (a) is limited to an amount that is not unconscionable considering all relevant factors, including the marginal transactional costs incurred by the holder in maintaining the apparent owner's property and any services received by the apparent owner.”)