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Home >> Accounts >> Checking Accounts
Offsetting Personal Accounts for Business Debt
Can a bank deduct money directly out of my personal and joint checking account (account is in my name and my husbands name), if there is a past due amount on a business credit card (in the same bank) for which they claim that my husband is a personal gurantor? Basically, they are saying that they can take the money out of any account that has my husband's name. Can they do so without notice or judgement? They took $2,000.00 out of the account, and I still did not get an answer from them, except that they can do it.
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 In most cases, setoff of a debt owed and deposit is a common and accepted practice in banking. It is allowed for in most loan contracts and deposit agreements. Credit cards are unique, however. Generally setoff is prohibited when there is a consumer charge. In this case, you have a business card that supposedly was used only for business purposes.
Here is what Banking Regulation Z says about offsets:
§226.12(d) Offsets by card issuer prohibited. (1) A card issuer may not take any action, either before or after termination of credit card privileges, to offset a cardholder's indebtedness arising from a consumer credit transaction under the relevant credit card plan against funds of the cardholder held on deposit with the card issuer.
(2) This paragraph does not alter or affect the right of a card issuer acting under state or Federal law to do any of the following with regard to funds of a cardholder held on deposit with the card issuer if the same procedure is constitutionally available to creditors generally: obtain or enforce a consensual security interest in the funds; attach or otherwise levy upon the funds; or obtain or enforce a court order relating to the funds.
(3) This paragraph does not prohibit a plan, if authorized in writing by the cardholder, under which the card issuer may periodically deduct all or part of the cardholder's credit card debt from a deposit account held with the card issuer (subject to the limitations in Sec. 226.13(d)(1)).
Published on BankingQuestions.com 2/16/10
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