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So your bank account has been frozen, leaving you unable to buy items or pay bills. You also won't be able to withdraw any money, putting your scheduled payments at risk.
"You'll certainly want to resolve the situation as soon as possible," says Shafeeka Anthony, marketing manager of JustMoney.
"Missed payments can also affect your credit score, which banks, leasing agents and other entities check to see if you are eligible for a loan. A credit score also determines the interest rate you'll be charged."
JustMoney explains why your bank account may have been blocked and the steps you can take to unfreeze your account – that is, if you haven't used it for illegal activity.
Why are bank accounts frozen?
A bank may freeze an account for several reasons – including if:
• You haven’t used your account for some time, and the bank has been unable to contact you using the last contact details you provided.
• Your account isn’t verified under the Financial Intelligence Centre Act (FICA). The bank usually verifies your identity and particulars before you open an account, so this is rarely an issue. However, if your information isn’t up to date, and the bank can’t get hold of you, your account may be frozen.
• Suspicious activity on your account leads the bank to believe you may be involved in illegal acts, such as fraud or money laundering. The bank would need to obtain compelling evidence before blocking your account, however.
• A court order requires the bank to freeze your account. This may happen, for example, if a creditor has been granted a judgment against you, or you’ve been declared insolvent or your estate is sequestrated.
• You pass away. Bank accounts are always frozen in the event of death, even if power of attorney has been granted to a surviving person. In South African law, powers of attorney are unenduring, meaning that if the grantor dies, they fall away.
Will you be notified before your account is frozen?
The Financial Sector Conduct Authority requires banks to provide reasonable notice and give a reason for blocking an account. The Ombudsman for Banking Services says a reasonable period is one to two months for individual accounts and two to three months for business accounts, depending on the circumstances.
However, this doesn't apply if a bank is legally required to freeze an account or if the account is being used for illegal purposes. If a bank suspects fraud or illegal activity, it may temporarily block access to the account and ask you to confirm certain details.
What can you do if your account is frozen?
"In most cases, you can contact your bank, and they will tell you how to regain access," says Anthony. Unblocking your account can be done relatively quickly in most cases, depending on the reason, provided you meet certain conditions. However, it becomes more complex if your case involves considerable debt or bankruptcy.
Here's what to do in specific cases of "frozen" accounts:
Lack of use. Your bank will first attempt to contact you; however, if no response is received, your account will be closed, and the funds transferred to a suspense account or "unclaimed balances" account. You'll have to provide the bank with sufficient details to identify yourself and your account to claim the funds.
A court order. You’ll need to have the judgment against you rescinded or set aside, or have it replaced by another court order that allows you to access your account. You can do this by working out a repayment plan with your creditor or allowing the creditor to take a portion of your salary or wages to pay the debt, via an emoluments attachment order.
In some cases, creditors will attach a portion of the funds in your account through a garnishee order, which the sheriff of the court will administer and pay to your creditor.
A deceased breadwinner. Accounts are frozen until the estate's financial affairs are settled, which can be difficult for relatives dealing with a traumatic loss, funeral costs, and no immediate income. Taking out life cover, with an immediate needs benefit, can prevent such a dire financial situation.
Dealing with debt
"If you are struggling with debt, it’s advisable to seek help as soon as possible so that you can take control before your bank account is blocked," says Anthony.
"Fortunately, there are reputable debt counselling companies in South Africa, and they do not charge any fees upfront.
"To apply, you’ll need to complete an application form, after which a debt counsellor will call you to find out more about your credit history and debt. Once the counsellor understands your situation, you may have your debt consolidated into a single payment, ideally with a reduced interest rate, and, potentially, over an extended payment term.
Questions may be edited for brevity and clarity.
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