It’s not uncommon for clients to call us in a panic because a bank or financial institution has refused to accept a valid power of attorney (POA) prepared for them. Naturally, they want to know what can be done to resolve the situation. The good news is that there are several remedies available. However, it’s important to remember that a bank’s rejection of a POA is often rooted in good intentions—primarily to protect you.
Before diving into solutions, let’s review what a power of attorney is, how it works, and why a bank might reject it.
What Is a Power of Attorney?
A power of attorney is a legal document in which the person creating it (known as the principal) appoints someone they trust (the agent or attorney-in-fact) to make financial decisions on their behalf. These decisions can range from buying and selling real estate to managing bank accounts, handling investments, or setting up estate planning documents.
POAs are especially valuable when:
- You are unable to handle financial matters due to illness, travel, or other circumstances.
- You become incapacitated and need someone to ensure your finances and interests are managed properly.
One critical point to remember is that a POA is only useful if your agent can access and use it. If the document is locked in a safe that no one can access, it’s effectively useless. Additionally, a POA is valid immediately upon signing—it doesn’t require the principal to be incapacitated for the agent to act. This underscores the importance of selecting a trustworthy agent, as the powers granted through a POA can be broad and have serious consequences if misused.
Why Might a Bank Reject a Power of Attorney?
Banks have a duty to ensure that POAs presented to them are valid and legally compliant. Unfortunately, this often results in frustration for agents attempting to use a POA, as banks take measures to prevent fraud and protect their customers.
Here are some common reasons banks may reject a POA:
- Fraud Prevention: POAs are powerful tools, and in the wrong hands, they can be used for fraudulent purposes.
- Internal Policies: Some banks have strict procedures, requiring their legal departments to review any POA presented. This process can result in delays or outright rejections if the POA doesn’t meet the bank’s internal standards.
- Customer Knowledge: Smaller or local banks, where staff have close relationships with their customers, may be more likely to accept a POA without much scrutiny. In contrast, larger banks often have rigid protocols that can create additional hurdles for agents.
While these safeguards can be frustrating for agents, they serve an important role in protecting the principal and the financial institution from fraud or misuse.
What Can You Do If Your Power of Attorney Is Rejected?
If you’ve provided a valid and legal power of attorney but a bank refuses to accept it, Connecticut law offers a solution.
Under Connecticut General Statutes § 1-350s, a properly acknowledged POA must be accepted by the institution within a specified time frame. If a bank refuses to accept the POA, the agent can submit a sworn certification that the POA is valid. This law requires the bank to either accept the POA or respond within 5 to 7 business days, depending on the circumstances. The statute also imposes penalties and provides agents with the ability to bring a lawsuit if the POA is wrongfully rejected.
This law is a powerful tool for agents facing difficulties and provides strong incentives for financial institutions to comply.
Need Help with Your Power of Attorney?
If you’re having trouble with a bank accepting your POA or need assistance updating or reviewing your document, we’re here to help. Contact us today, and we’ll guide you through the process to ensure your power of attorney works as intended when you need it most.
