Frozen out

It was a hassle for Frank Lopez to pay his Prague phone bill with dollars from his bank in Canada. Working as a consultant in the Czech Republic, Lopez needed a Czech account. He went to a ČSOB branch and signed up.

When his statements began to arrive in the mail, Lopez found himself bewildered by the bank's variety of small monthly fees. "I couldn't tell what they were, because of the language," he said. He felt uncertain. He decided to close his account.

But to do so, ČSOB told him, he'd have to wait for 45 days.

For people like Lopez, severing ties with banks in the Czech Republic can be a tortuous process, lasting two weeks to three months or beyond. Customers are frozen out of their money as they wait for the bank to clear possible charges that may appear on their debit cards.

"Banks are often accused of making it difficult to close accounts because almost invariably that means their customers will open an account with one of their competitors," said Philip Middleton, retail banking partner at the accounting firm Ernst & Young.

Waiting game

There's no standard European Union regulation that governs the amount of time banks are allowed to close and open accounts, Middleton said, and the time is often "dependent on how the banks in a country want to arrange it."

The Czech Banking Association, which represents nearly all of the country's banks, deferred comment to the individual banks.

The Prague Post surveyed four banks operating in the Czech Republic: ČSOB, HVB Bank, Česká spořitelna and Raiffeisenbank. At all of them, closing an account was free and immediate for customers without debit cards, but that is a small minority of customers, said Tomáš Kofroň, spokesman for Raiffeisenbank.

All four required a waiting period to close accounts with debit cards, also called payment cards. Česká spořitelna budgets the least amount of time, taking several days. ČSOB and Raiffeisenbank wait 45 days to close accounts — about standard, Kofroň said. HVB will not close the account for three months.

During this holding period, banks wait for possible "offline" charges on accounts — from a small restaurant in an isolated part of the country, for example. These can take weeks to come through, Kofroň said. Another concern is scheduled monthly charges on the card, like electricity bills. Often, even after customers change their billing information, companies will slip up and charge old accounts.

And there's also fraud.

"Someone with criminal intent could take out all their money, make expensive charges on the account and be in hiding before you know better," Middleton said.

Because of these risks, it's common for banks to hold the minimum deposit required for the account, Middleton said. This can vary among accounts at Czech banks, but it's often 500 Kč ($24) at ČSOB and Raiffeisenbank and 1,000 Kč at Česká spořitelna.

To avoid losing this money, "we highly recommend that foreign clients come to the bank two or three weeks before their scheduled departure," said Kristýna Havligerová, a spokeswoman for Česká spořitelna.

As the country modernizes and the banking infrastructure improves, the amount of time banks will hold money should reduce, Middleton said. He used the United Kingdom as an example: Until a few years ago, it took four to six weeks to close a bank account there. Now, spurred by the government, consumer advocates and upstart banks, the market is more competitive and closing an account can take less than two weeks.

Middleton is uncertain when such reform could occur in the Czech Republic.

Thanks for your business

It's been a year since Lopez tried to close his account. He waited 45 days for his account to close and took his 500 Kč in frozen funds. But, the next month, he received another statement from the bank with more small fees. Returning to his branch, he was told that his account was not completely closed, after all, and he'd have to wait another month and a half.

Lopez stopped going to the branch and continues to receive statements from the bank. His solution: "I just ignore them."

Alex Walker, a middle-school teacher from Washington state who worked in Prague for one year, had a different strategy when he and his wife left town. He had heard of the delays in closing bank accounts and so withdrew all but 30 Kč from the ATM before walking in to the bank to close his account.

"They told us they'd put a hold on our account for 90 days and then we could collect our remaining funds," he said. "They're still there, if you want to get them."

Other articles in Banking & Finance (13/12/2006):

• Bond sale buoys the state
• In Brief

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