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Paying an Overdraft from Another Account
Can a credit union take money from someone else's account to clear up an overdraft that I have? There was a deposit made out to my grandmother, and due to her age and inabilities, I am a signer on her account. I am not on the account that issued the cashier's check. The credit union took grandma's money that was deposited in her account, to clear my debt. I asked if this was legal and I offered to take a loan (which I had done three or four times before and repaid on time). I was told I couldn't, because they had already taken my grandma's money to take care of it. I called the issuing bank and they said that they will not honor the check when it comes to them because it has my signature and not their customer's signature. Is this true and is this legal?
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 Several things come into play here and they can be technical. Depending on how the cashier's check was written and endorsed, your grandmother received benefit of the funds because they went into an account she owns. Reversing it may be difficult.
If you are on the account as an owner, not just an authorized signer of your grandmother's account, the credit union has the right to setoff the deposits. The deposit agreements you have will allow this. If you are an authorized signer and not an owner, the right to setoff is put into question, as that was not your money to take.
Lastly, they are not obligated to make you a loan. If you have done this before, the credit union may simply be saying enough is enough. You shouldn't get into overdraft such that you require several loans to get out. They found a faster solution and took it. You can plead your case to a branch manager or officer there, explaining that the funds are needed by your grandmother, assuming that is true, but in all likelihood they followed standard practices to collect money they were owed.
Published on BankingQuestions.com 9/29/09
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