I always tell clients that the law is not always applied perfectly when interacting with the practicalities of the real world and real people. In other words, even when a person has the legal authority to take some action, they may still run into obstacles and red tape. For example, a bank teller or call center representative may initially tell a client something different than their attorney. Banks and other financial institutions generally do business in multiple jurisdictions, and even with training, are often confused regarding specific state laws surrounding wills, trusts, and powers of attorney. These matters spark confusion among lay persons and so it is quite common for clients to receive information contradictory to what I have given the client, and so I try to forewarn of these obstacles to be encountered on the frontlines of large organizational structures. Even legal departments staffed with attorneys are often incorrect or misguided when it comes to the laws of the specific jurisdiction at issue.
In this blog, I will discuss whether banks can refuse to accept a general power of attorney. The short answer is “yes.” But, as with many questions in the law, the complete answer is “yes, but.” I will discuss the “but” and the process which North Carolina has for presentation, acceptance or refusal of a power of attorney by a bank or other third party.
Process for Accepting a Power of Attorney in North Carolina
A bank’s outright refusal to accept a power of attorney is fairly rare due to North Carolina’s power of attorney statute, and specifically N.C.G.S. § 32C‑1‑119, which provides significant protection for a bank’s good faith acceptance and reliance on a presented power of attorney.
First, banks can presume a signature on an acknowledged (i.e. notarized) power of attorney is authentic. Additionally, unless the bank has actual knowledge that a power of attorney has been revoked, terminated, or is void, or that the agent under the power of attorney is exceeding their authority, the bank can assume, if acting in good faith, that the power of attorney is still in effect and that the agent is not exceeding their authority. In short, banks are generally free from liability associated with the actions by agents who misappropriate or mismanage funds or otherwise breach their fiduciary duties unless they have actual knowledge of such. For added protection, banks do often request a certification from an agent under a power of attorney which is essentially an affidavit signed by the agent certifying that the agent did not have actual knowledge at the time they presented the power of attorney (i) that it was void, invalid, or terminated; (ii) that the agent’s authority was void, invalid, or terminated; or (iii) of facts that would cause the agent to question the authenticity or validity of the power of attorney.
Before accepting a power of attorney, banks are permitted to request such a certification from the agent as well as a translation of the power of attorney if the power of attorney contains a language other than English, or an opinion of counsel as to any matter of law concerning the power of attorney along with a written statement as to the reason for the request.
Timing of Accepting or Refusing a Power of Attorney
N.C.G.S. § 32C‑1‑120 provides the timing for accepting or refusing a power of attorney. Within seven (7) business days after presentation of an acknowledged power of attorney a bank should (i) accept the power of attorney; (ii) refuse to accept the power; or (iii) request a certification, a translation, or an opinion of counsel as discussed above.
Additionally, if a certification, translation, or opinion of counsel is requested, then within five (5) business days after receipt of the requested items in reasonably satisfactory form, the bank must either accept the power of attorney or refuse to accept the power of attorney. Lastly, a bank may not require an additional or different form of power of attorney if the power of attorney presented reasonably appears to authorize the agent to conduct the business the agent desires to conduct.
In short, the process involves presentation of the power of attorney, followed by refusal, acceptance, or permitted supplementation request within seven (7) business days. If a permitted supplementation request is made, then the bank has an additional five (5) business days after receipt of the supplementation to accept or refuse the power of attorney.
Permitted Reasons for Refusing a Power of Attorney
First, a bank is not required to accept a power of attorney that has not been acknowledged (i.e. notarized). Additionally, a bank is permitted to refuse a power of attorney under the following nine (9) circumstances specified in N.C.G.S. § 32C‑1‑120(c).
(1) The bank is not otherwise required to conduct a transaction with the principal;
(2) Engaging in the transaction would be inconsistent with applicable federal law;
(3) The bank knows the power of attorney is terminated or invalid or the agent lacks authority;
(4) A request for a certification, a translation, or an opinion of counsel is refused;
(5) The certification, translation, or the opinion of counsel requested is not received in reasonably satisfactory form within a reasonable period of time;
(6) The bank believes that the power of attorney is not valid or that the agent lacks authority;
(7) The bank has reasonable cause to question the authenticity or validity of the power of attorney or the appropriateness of its exercise by the agent;
(8) The agent or principal has previously breached any agreement with the bank;
(9) The bank makes, or has actual knowledge that another person has made a report to the protective services office or law enforcement that the principal may be subject to physical or financial abuse, neglect, exploitation.
In addition, a bank is not required to open an account for a person who is not already a customer, make a loan at the request of an agent, or transact business with the agent not authorized by the power of attorney or in violation of applicable law.
Liability for Refusing to Accept a Power of Attorney
If a bank unreasonably refuses to accept a power of attorney or does so in a manner inconsistent with Chapter 32C of the North Carolina General Statutes, then they are subject to a court order mandating acceptance and liability for reasonable attorney’s fees and the costs of pursuing such an action. A bank is not considered to have unreasonably refused a power of attorney solely on the basis of failure to accept the power of attorney within seven (7) business days.
Conclusion
In conclusion, while banks in North Carolina can refuse to accept a power of attorney under certain conditions, they must adhere to the statutory requirements and act in good faith. If a bank refuses a power of attorney without reasonable cause, it may be subject to legal consequences, including court orders and liability for attorney’s fees and costs incurred due to the refusal.
About the Author:
Andrew M. Brower is a Board Certified Specialist in Estate Planning and Probate Law at Law Firm Carolinas. If you would like more information on the topics discussed in this blog, please contact our office to schedule a consultation.