Why Banks Deduct Charges Even when An Account Is Dormant.
Many bank customers are surprised to discover that their account balance has reduced despite not using the account for months or even years. The assumption is simple: if an account is dormant, no charges should apply. In reality, banks continue to deduct certain charges from dormant accounts, and in most cases, this practice is legal and contractually permitted.
Understanding why, requires a look at banking contracts, regulatory rules, and the nature of dormant accounts.
What Does “Dormant Account” Really Mean?
A dormant account is not a closed account, it is an account that has experienced no customer initiated transactions for a defined period (usually 6–12 months, depending on the bank and regulation).
In Nigeria, under CBN guidelines, an account becomes dormant when:
- There are no deposits or withdrawals initiated by the customer
- The account is inactive but still legally open
- The bank continues to maintain records, system access, and compliance oversight.
- Dormancy restricts usage, not existence.
The Contractual Basis: (Account Terms and Conditions)
When opening a bank account, customers agree to terms and conditions, often without reading the fine print in which the contracts typically contain certain terms and condition like:
- The account remains subject to maintenance and service charges
- Certain fees apply whether or not the account is actively used
- The bank may deduct charges unless the account is formally closed
Legally, once accepted, these terms form a binding contract. Dormancy does not suspend contractual obligations unless explicitly stated.
Account Maintenance and Operational Costs
Banks incur ongoing costs even when an account is inactive, including:
- Core banking system maintenance
- Cybersecurity and fraud monitoring
- Regulatory reporting and compliance
- Data storage and audit requirements.
- Card maintenance or renewal fees.
Because the account still exists on the bank’s books, maintenance charges may continue to accrue. This is why banks often deduct, Account maintenance fees, SMS alert charges (if not deactivated). These deductions are considered payment for ongoing services, not transaction-based activity.
Regulatory Charges Still Apply
Some deductions from dormant accounts are not imposed by banks, but mandated by regulation. These may include:
- Stamp duty (where applicable on qualifying inflows)
- Regulatory or statutory levies
- Charges approved under the CBN Guide to Charges by Banks and Other Financial Institutions
The Central Bank of Nigeria (CBN) allows banks to apply only charges that are approved and disclosed. If a charge appears on the CBN’s approved list, dormancy alone does not automatically prohibit its deduction.
Dormancy Does Not Mean Fee Suspension
A common misconception is that dormancy equals fee exemption. In law and banking practice, Dormancy limits customer initiated transactions , It does not freeze the account. financial obligations charges stop only when the account is closed, not dormant. To stop deductions, customers must formally request
Account closure, or Conversion to a zero-maintenance or no-charge account (where available).
When Deductions from Dormant Accounts Become Illegal
While banks may deduct approved charges, not all deductions are lawful. Charges become illegal if:
- They are not approved by the CBN
- They exceed the approved tariff
- They were not disclosed in the account terms
- They continue after the account has been formally closed
- They violate consumer protection regulations
Under the CBN Consumer Protection Regulations and the Federal Competition and Consumer Protection Act (FCCPA) 2018, customers have the right to challenge unfair or excessive charges.
What Customers Should Do
To avoid unexpected deductions:
- Review your bank’s schedule of charges
- Deactivate unnecessary services (SMS alerts, cards)
- Regularly monitor dormant accounts
- Close accounts you no longer need
- Report unauthorized deductions to the bank, and if unresolved, to the CBN Consumer Protection Department.
Conclusion
Banks deduct charges from dormant accounts not because the accounts are being used, but because they still exist, are maintained, and are governed by contractual and regulatory obligations. Dormancy limits access, not liability. While this practice is largely legal, it must strictly follow CBN approved charges, transparency requirements, and consumer protection laws.
Ultimately, the responsibility is shared: banks must charge only what is lawful and disclosed, while customers must actively manage or formally close accounts they no longer intend to use.
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