IBA Compliance Connection

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What documentation should we require before closing an account remotely? Are there different guidelines for accounts that have a zero balance and accounts that have remaining funds? For example, if we receive a request to close an account with a zero balance, are we still required to obtain a letter of direction with a signature, or is an email from the email address we have on file for the account sufficient?

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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA.

We believe that you may accept electronic signatures to close accounts. Both Illinois and federal law provide that an electronic signature “may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” Additionally, the Uniform Commercial Code (UCC) does not require you to obtain signatures on stop payment orders — it requires only that your customers provide “an order to the bank describing the item or account with reasonable certainty” to close an account.

However, a signature may be required by your bank’s policies or procedures, or your account agreements. If your bank’s policies, procedures, or account agreements require a signature before closing an account, we recommend asking that customers electronically sign your letter of direction form (for example, by simply typing their name), rather than relying on emails, which may or may not be signed. 

For resources related to our guidance, please see:

  • Electronic Signatures in Global and National Commerce (ESIGN) Act, 15 USC 7001(a)(1) (“A signature, contract, or other record . . . may not be denied legal effect, validity, or enforceability solely because it is in electronic form.”)
  • Electronic Commerce Security Act, 5 ILCS 175/5-110 (“Information, records, and signatures shall not be denied legal effect, validity, or enforceability solely on the grounds that they are in electronic form.”)
  • UCC, 810 ILCS 5/4-403(a) (“A customer or any person authorized to draw on the account if there is more than one person may stop payment of any item drawn on the customer’s account or close the account by an order to the bank describing the item or account with reasonable certainty received at a time and in a manner that affords the bank a reasonable opportunity to act on it before any action by the bank with respect to the item described in Section 4-303. If the signature of more than one person is required to draw on an account, any of these persons may stop payment or close the account.”)
  • UCC, 810 ILCS 5/4-103 (“The effect of the provisions of this Article may be varied by agreement . . . .”)