Can banks freeze checking accounts of an individual to obtain a payment on a credit card by the same institution? This incurs further debts on the individual who is trying to pay essential living bills: electric, gas. etc. Now the individual has to pay for a cancelled check even though the money is in the account.
Untitled
It is illegal for a bank to use set-off to take funds from a deposit account in order to apply those funds to its customer's credit card account in the same bank. The Truth in Lending regulation (Regulation Z), makes it clear that holding a consumer's account hostage is also not permitted. An exception would be a credit card account that includes a security interest in the deposit account that permits such freezes.
The individual should ask the bank to review the commentary to Regulation Z, section 226.12(d). Then, unless the credit card account includes a security interest in the checking account, the bank should get rid of the freeze. If not, a call to an attorney would be a good idea. The bank could be making a big mistake that could make it liable for damages for any checks it bounces due to the freeze. It's entirely possible that someone in the bank's credit card collection staff doesn't know the law and has attempted something not permitted by bank policy. If the bank releases the account, consider moving the account or the credit card elsewhere to avoid the potential for a repeat situation.
BankingQuestions.com is a free service made possible by the generous support of our advertisers. Advertisers are not responsible for site content. Please help us keep BankingQuestions.com FREE by supporting our advertisers. When you see an ad for a product or service you may have an interest in, click through to learn more.
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
It is illegal for a bank to use set-off to take funds from a deposit account in order to apply those funds to its customer's credit card account in the same bank. The Truth in Lending regulation (Regulation Z), makes it clear that holding a consumer's account hostage is also not permitted. An exception would be a credit card account that includes a security interest in the deposit account that permits such freezes.