The Toothless POA Law: Why Banks Still Reject Valid Statutory Powers of Attorney in New York
New York law requires banks and financial institutions to accept a valid statutory power of attorney (POA).
Under General Obligations Law § 5-1504, a bank or financial institution must accept a properly executed statutory short form POA unless it has "reasonable cause" to reject it. The law even sets a timeline:
Within 10 business days, the institution must either:
Accept the POA;
Request an agent's certification or an attorney's opinion of counsel; or
Provide a written explanation for rejection.
The law also defines what qualifies as reasonable cause, such as suspicion of fraud or improper execution. And it includes a provision authorizing the agent to bring a special proceeding to compel acceptance.
Banks continue to reject statutory POAS - often without justification. Why? Because there are no real penalties for refusal.
The statute allows for a court order to enforce acceptance, but that's a litigation burden placed on the person presenting the POA
The institution faces no meaningful consequence for dragging its feet or refusing outright.
At this point, the individual is left to choose between initiating a lawsuit or, in many cases, pursuing a guardianship proceeding, which may seem just as practical.
The law was designed to streamline access to financial accounts using a simple statutory form. But instead, it invites delay, confusion, and often litigation - precisely the outcomes the POA was meant to avoid.
A Legal Right Without a Remedy
The problem is not the form. It's the lack of enforcement. When a bank refuses to honor a valid POA:
It is breaking the law.
But it faces no sanction.
And the burden falls entirely on the person who needs access.
That's not how legal compliance is supposed to work.
A person can initiate a special proceeding under GOL § 5-1510 to compel a financial institution to honor a valid statutory POA. These proceedings are governed by CPLR Article 4, meaning they are designed as summary procedures - intended to be faster and more streamlined than full-blown litigation.
But in reality, they can still be burdensome.
That trade-off undermines the very purpose of having a power of attorney in the first place.
The Policy Gap
The root cause of many joint account abuses, convenience account disputes, and guardianship petitions is the same: banks refusing to honor valid POAS.
Require banks to accept the statutory POA.
Impose a penalty for noncompliance.
Shift the burden off families and onto institutions.
This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship.
For more information on this and other topics, please contact Kevin via any of the channels listed below:
📧 kevin@kmckernan.com | 📞 718-317-5007