Limited Bank Account

Every day in Israel about 15,000 checks are returned (“chozrim”) or bounced. Over one hundred thousand customers have had their accounts restricted following returned checks and there are over two hundred and fifty thousand restricted bank accounts.

There is almost no business in the State of Israel that gives credit to their customers and has not found themselves with a customer`s check bounced by the bank.

To fight the phenomenon of the returned checks, the legislators passed a law that imposes sanctions on clients whose account has had too many checks returned in too short of a period.

A limited bank account is an account that has had 10 checks or more bounced (because the account owner didn’t have enough money to cover them, but not because of technical problems) during a period of 12 months. This restriction (Limited bank account) applies not only to the account but to you as well; therefore any other bank account you may have will also be restricted. This restriction (called “mugbalut” in Hebrew) is immediately reported to the central bank (Bank of Israel).

If the account is a joint account the restrictions are not only limited to the one who withdrew the checks. No other partner in the account will be allowed to withdraw checks from the account.

When must the bank inform the customer about limiting? The first message, a warning, should be sent with the return of the first five checks. This is a warning sign, informing that the account activity is invalid. The second message, a restriction, is sent to the client within 5 business days of the return of the tenth check. The notification must include the details of the checks that were made which led to the restriction of the account, and the dates of the beginning and end of the restriction.

The banks are obligated to send you messages at the aforementioned times. But failure to receive the message will not release the client from the restriction. A client`s claim that the bank had not warned or informed him about the limited account will not be accepted as an excuse to cancel the restriction, as long as it was proven that the bank sent a message to his address.

Restrictions on a client who has been declared “mugbal” are:

• A limited client is not allowed to open a new checking account in his bank and sometimes even in any other bank.
   
• Limited clients may not withdraw any amount using a check from their limited account but limited clients may continue to draw funds from other accounts which were not limited.
   
• Limitations and restrictions are valid for one year if it is not a “Severe Restriction”.
   

During the limitation period you can pay bills using funds from that account, by any other means besides a check. This is according to the client`s settlement agreement with the bank.

A severe restriction applies to those who own two or more accounts that were restricted, or who were announced “mugbal” within three years from the end of the last restriction. This is called “mugbal be nessibot machmirot”

Such a client is not entitled to draw a check on any amount of his checking account for two years, during which time he must not open any new checking accounts.

Bank of Israel publishes limited account numbers, and allows all those interested to see if any account is limited by special circumstances. Business entities receive information about the numbers of limited accounts.

Here anyone can find the “mugbal” accounts: http://www.bankisrael.gov.il/black.html

By law, information about customers does not include those refusing a divorce, appeals to the Magistrate’s Court about his restrictions and who has not undergone 60 days of being considered limited.

Please remember: Israel is a small country and it takes years to “clean” your name if you were considered “mugbal”.
 

Sincerely,
 

Tzvi Szajnbrum, Attorney at Law