My sister has a car loan at her bank. She called for a payoff amount and it seemed high. It turns out that when she was ill and had to file for disability, she had fees and charges on her checking account she couldn't pay. She did keep her car payments up. Now the bank won't release her car title until these deposit account fees are paid. Can they do that?
Yes, they can. Standard agreements used in banks (and I am assuming these are standard) allow for what is known as "setoff" and "cross collateralization." These are in your sister's deposit agreement and loan contract. What they mean is, if the bank owes her money and she owes the bank money, than one debt may be used to setoff the other. The cross collateralization says that security on one loan may be used to also secure other debts she has with the bank.
If the bank has the car title, they may hold it until all debts are paid to them. The fees that accumulated on that deposit account are a debt that is owed to the bank. Technically the bank could enforce their lien through repossession of the collateral. That would be rare though, but there is no reason for them to lose money and they are enforcing rights they and your sister contracted.
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Yes, they can. Standard agreements used in banks (and I am assuming these are standard) allow for what is known as "setoff" and "cross collateralization." These are in your sister's deposit agreement and loan contract. What they mean is, if the bank owes her money and she owes the bank money, than one debt may be used to setoff the other. The cross collateralization says that security on one loan may be used to also secure other debts she has with the bank. 