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by Carolyn Jones, President of Financial Records Consultants and BOL Guru
The most amazing thing about bank records and record retention is that even though it is one of the most important areas of the bank it is the last project on the bank's list of priorities.
Usually bank personnel are less than familiar with the laws regulating retention, and rightly so. The laws are confusing, overlapping, vague and numerous. There are many law makers, state and federal, involved. Often, bank personnel want to retain records permanently that have little or no legal, fiscal or archival value or they want to retain them for the mythical seven years. Many laws and regulations mandate that the retention period of bank records and most others is that they are required to be kept between two and six years. Many times, state regulators require the same records to be keep up to eleven years. If a record has a legal requirement, whether two years or eleven years, the banks should dispose of the record at end of the retention period.
Some bankers feel it is best "for the customer" to retain certain records for a long period of time. This mindset could backfire and cause the customer (or the bank) to lose a lawsuit. If a bank's records are subpoenaed, the records or their reproduction, and substantiating records must be supplied. If they are not available, a reasonable reason for their lack must be provided. If the records have been destroyed by a method set forth and practiced routinely by the bank, the retention and destruction of the record is documented and justified. However, if you destroy the records when there is no policy and procedures program in place, you may be considered at fault and in turn lose the case. You must be able to testify that the records were destroyed in the regular course of business and by an established policy.