Users Over-Funding Accounts Legal Implications?
<p>Some users of my company's service overfund their account in anticipation, I guess, that they will be using those funds over time. How an I to deal with those funds?</p>

<p>Is it fair to assume that most of those funds will be used over time and I can use those funds? Are there any rules of thumb on this?</p>

<p>Or, perhaps, users forget about their funds in which what is my responsibility to notify them about that?</p>

<p>Do I need to put those funds in a type of "escrow" account to be sure it is available for them should they ask for a refund?</p>

<p>If I understand your question correctly, you have some clients who have paid you for services that you have not yet provided and, indeed, they have not yet requested. Is this correct?</p>

<p>The accounting term for this is a "prepayment". The correct accounting treatment is to increase an asset account (your bank account) and create a liability account (Prepayments or something similar). You need to talk to your accountant about how to treat these for consumption and income taxes.</p>

<p>Legally, these people are now creditors of your business - just like all of your suppliers and employees. There is no legal requirement to escrow or otherwise treat this as trust money. Basically, if your business goes bust they will lose their money.</p>

<p>This is something that you should have dealt with in your contract with your customers - if you are running an online business then you should get a lawyer to revise your terms of service to cover things like how they can ask for a refund (and how long you have to get it to them) and how long (or if) they forfeit the funds. As it stands the money effectively becomes yours after whatever time under a statute of limitation applies to transactions of this type and size (under whatever law applies to the contract) since after that time they cannot sue to get it back.</p>

<p>Some more details, to complement Dale M's excellent answer. Note that this is general advice, as mentioned in the site disclaimer. For specific advice, ask a legal professional.</p>

<blockquote>
  <p>Is it fair to assume that most of those funds will be used over time
  and I can use those funds? Are there any rules of thumb on this?</p>
</blockquote>

<p>As Dale M explained, you can use those funds like any other money you have. It's yours for the time being. However, customers may ask for it to be refunded, in which case you probably will have to give it back (whether and how you can limit that depends on specific rules in your jurisdiction).</p>

<blockquote>
  <p>Or, perhaps, users forget about their funds in which what is my
  responsibility to notify them about that?</p>
</blockquote>

<p>Again, depends on jurisdiction and consumer protection laws, but usually there is no obligation. Still, it would probably be very bad for your image to let customers silently forfeit their money, so you better inform them.</p>

<blockquote>
  <p>Do I need to put those funds in a type of "escrow" account to be sure
  it is available for them should they ask for a refund?</p>
</blockquote>

<p>No, but you must make sure you have enough liquidity to satisfy any refund requests. If you don't, that is (usually) not a crime, but if you cannot refund, you will go bankrupt. </p>

accounting