What is a Frozen Account

A frozen account is an account to which no withdrawals or purchases can typically be charged, however there may be certain exceptions depending on the type of freeze in place. This usually occurs when the account holder fails to pay promptly for purchases charged to the account. For example, cash accounts are frozen for 90 days until the full purchase price of the intended order is paid in full.

BREAKING DOWN Frozen Account

In other words, when a bank account is frozen, it may be because money owed to another individual or business. Any creditor that has a judgment against an individual can also have their bank account frozen. The creditor can actually freeze the account for up to twice the amount that is owed. If someone receives a notice from their bank stating that their account has been frozen, they can look for the lawyer and phone number that is listed on the notice. If they did not receive a notice after the account was frozen, they can call the bank and ask for the lawyer's name and phone number so they can attempt to settle the account.

Why Accounts May Be Frozen

Regulators or a court of law may freeze accounts for such reasons as failure to disburse payments that are due or other violations. In addition to bank accounts, brokerage accounts can also be frozen by the Federal Reserve Board under the stipulations of Regulation T concerning cash accounts and the purchase of securities. The 90-day freeze is done to prevent freeriding, a prohibited act where an investor attempts to buy and then sell securities without fully paying for them. During such a freeze, the investor may continue to purchase securities; however, they must pay for the trades in full on the date they are made.

Banks might also freeze accounts if they believe that the account activity is specious or not in compliance. This may stem from actions that the bank suspects were fraudulent and perhaps not taken by the account holder. For instance, a sudden and suspicious exorbitant withdrawal or transfer to an overseas account may indicate an account has been compromised. Accounts may also be frozen if the owner passes away and an heir or administrator to the decedent’s estate has yet to be named.

If an individual is found to be complicit in certain crimes, their accounts may be frozen, potentially including those held jointly with spouses and business partners. An account might also be frozen by a bank or a court of law if the owner is suspected of illegally activity.