Imagine you suddenly find that you can’t make credit card payments, withdraw money or complete online transfers. You carry out a few checks and realise that your bank account has been frozen. Once the initial shock has passed, you pick yourself up and think about what to do next. In this article, myLIFE explains everything you need to know about frozen accounts and the best way to handle the situation.
Would you like your bank to grant you access to the balance on an account that has been fully or partially frozen? Keep calm and bear in mind that the bank wouldn’t have frozen your account without good reason. The first thing to do is find out why the account was frozen so that you and your adviser can work out a solution together. At this point, we should note that this article doesn’t claim to cover account freezing in exhaustive detail and that the information provided is no substitute for a conversation with your adviser or the most appropriate expert in your specific circumstances. Our aim is simply to help you to identify why your account may have been frozen and to suggest a few steps to take to try to resolve the issue. We should also clarify that this article doesn’t cover bank pledges for start-ups or what happens if an account is frozen as a result of fraudulent or criminal activities.
Possible reasons for the freeze
The first person who may have frozen your account is you. Let’s imagine your ID and bank cards are stolen. If you’re worried that someone could use your account without your permission or try to take money out of it, you can contact the bank or your relationship manager directly and ask for your account to be frozen until the situation is resolved. You can even choose to freeze certain transaction types or channels. For example, you can ask your bank to never accept instructions from you sent by fax or email. Lastly, if your account is dormant (i.e. inactive), the bank gradually implements varying types of freeze (after 3, 5, 9 and 15 years).
Another possible scenario is that one of the people with whom you hold a joint account has revoked joint and several liability. This is not a freeze per se, but in practice it does mean that you won’t be able to conduct any operations whatsoever without the signature of your joint holders.
The account may also be frozen on the initiative of the bank itself or of third parties authorised to request the bank to do so in specific circumstances, such as:
- the death of a joint account holder. If a client passes away, the bank is required to freeze all of their accounts and assets (savings account, safe deposit box access, securities accounts, etc.) until their estate is settled. It goes without saying that this may take some time, particularly if lawsuits are filed. During this period, you will not be able to make withdrawals or transfers from the account (even if it is a joint account) regardless of whether or not you have power of attorney. If your power of attorney is classified as “post mortem”, it will remain in full force after the donor passes away provided that their heirs have been informed of the existence of the post-mortem mandate. The heirs can revoke the post-mortem mandate insofar as it applies to the bank at any time. Certain outflows can even be decided on a case-by-case basis, for example to cover funeral expenses.
- the settlement of a debt. If the bank is duly informed that a court has issued a seizure order, it is legally obliged to comply. Depending on the type of seizure, it must transfer the amount in question to the creditor or freeze the account (or the amount to which the seizure order applies). In cases like these, it is your responsibility to provide the amount claimed within the allotted time. If your financial situation means that you’re not able to pay off the full amount within the allotted time, you can always try to agree an arrangement with your bank to organise an instalment schedule, at the end of which your account will be unfrozen.
- the settlement of your tax liabilities may, if the outcome of the administrative phase is not in your favour, result in a garnishment by the tax authorities (Administration des contributions directes, ACD) of the funds you hold at the bank.
- accounts held by minors. These accounts aren’t technically frozen, but specific signature rights apply. This means that you aren’t free to do as you please with them. If you have opened an account for your child who is a minor, you retain control over the account until your child turns 18 and get to decide whether or not they should have access to the account balance. However, the bank may, on its own initiative, block certain transactions and ask for supporting documents if the transactions in question do not appear to be in the interests of the minor.
- unlike some of its neighbours, Luxembourg doesn’t have a national register of people who are subject to a blanket banking ban, but banks can decide to temporarily or permanently blacklist a client if they breach the general terms and conditions of the institution in question. For instance, a bank might decide to blacklist someone for repeatedly misusing their credit cards.
How should you react?
Are you looking to have your account unfrozen as quickly as possible? There is only one solution for temporary freezes: identify and fix the root cause. For example, this might mean:
- settling the estate of a deceased person;
- paying off your debts to the tax authorities or other creditors. You could also try to reach an agreement with the ACD or your creditor to extend the repayment period or to pay off your debt in instalments. Of course, if you think that you’re being asked for money you don’t owe, you have every right to file a lawsuit;
- reaching the age of 18, if you are a minor hoping to have specific restrictions lifted. If you don’t want to wait, you could try to convince your parents to give you access to the balance on your account.
Contact your adviser for help understanding the situation and working out what can be done about it.
As the saying goes, “prevention is better than cure.” If you want to avoid having your account frozen, sometimes all it takes is a few common-sense habits. For example, always keep an eye on your account balance and pay money in regularly to avoid going into the red. To help you do this, myLIFE regularly publishes content designed to explain how to define and stick to your budget.
If someone passes away, unfortunately there’s nothing you can do but take all of the action that’s required of you and then wait it out patiently until all of the conditions have been met and you can access your account.
In other circumstances, it may be possible to anticipate that your account could be frozen or that your assets could be seized, especially if you have outstanding tax or debts to pay. Are you having trouble paying off a debt? Be as transparent as possible with your creditor and try to find an amicable solution before matters get out of hand. For example, you may be able to stagger your repayments if you’re not able to pay the full amount at once.