Bridgeport-based People’s Bank is among the many financial institutions that have refused to freeze individuals’ accounts after receiving tax warrants from the city of Bridgeport. The city is trying to crack down on delinquent taxpayers but the banks say they must protect their customers.
The Connecticut Bankers Association is pushing for legislation that would help cities and towns collect unpaid taxes without placing undoable expectations on the state’s banks. The effort comes in response to tax warrants issued by the city of Bridgeport in June, which demanded banks search through records of more than 120,000 names of delinquent taxpayers and freeze the amount owed, and send the money to the city.
The city sent out CD-ROMs filled with the names in June as a way to reclaim unpaid car taxes. The statute regulating the collection of taxes says that banks must comply with warrants within 36 hours.
Many banks, including Bridgeport-based People’s Bank and Waterbury-based Webster Bank, refused to freeze accounts after receiving the warrants, and said they have to protect their customers, according to the Associated Press.
“The banks contend that Â… serving the warrant is procedurally defective,” said People’s spokesman Brent Digiorgio.
Many banks were concerned about customer privacy and data privacy, said Lindsay Pinkham, CBA’s senior vice president and secretary. The Federal Deposit Insurance Corp. has strict regulations for banks regarding data privacy. Some banks returned the CD-ROMS to the city because of those regulations, and some banks found errors on the CDs themselves, including at least one that was blank, Pinkham said.
CBA stepped in shortly after the city served the warrants, and negotiated a reprieve for member banks, including People’s and Webster. The association contends that the way the warrants were served was out of line with the state statute, and that each warrant should be served separately. Instead, they were served as a list of names on a CD-ROM, and included a cover letter. The electronic format meant that banks could use computers to look for possible matches, but accuracy requires human review, which could not be achieved in the 36 hours allowed.
“You cannot look at 122,000 records [in 36 hours],” Pinkham said. “It caught everyone by surprise because no one’s ever seen this [on such a grand scale] before.”
There has been at least one other instance of a municipality issuing warrants to banks, but in that case it involved 18 names, Pinkham said. Processing in excess of 120,000 names takes much more manpower.
CBA hopes to spearhead the creation of new legislation that will make it possible for cities and towns to collect unpaid taxes from bank accounts while maintaining customer privacy and not placing undue stress on the banks’ manpower. The association’s first task-force meeting will be held in early September, Pinkham said.
However, banks and credit unions that are not CBA members are required to comply with the warrant. As of late last week, Bridgeport’s move netted about $100,000, according to the AP.
“It’s a fishing expedition at our expense,” Cheryl Ernst, manager of the Bridgeport Post Office Federal Credit Union, which is freezing funds in customer accounts, told the AP.
Despite complains, Bridgeport officials said they intend to continue trying to collect unpaid car taxes with the bank warrants.
“We have been developing this for the last several months,” Michael Feeney, the city’s chief administrative officer, explained to the AP on Aug. 19. “We are going to do what we need to do.”
Feeney could not be reached by The Commercial Record by its deadline on Wednesday.
