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Home >> Accounts >> Checking Accounts
Bank Paid Off One Account with Funds from Another
I have a twenty year-old son who I added to my checking account a few years ago. He then opened an account at the same bank and overdrew it. Now the bank has taken money out of my account to pay off his account without notification. Can they do this? By using the funds from my account the bank caused me to overdraw my account. How can I resolve this situation?
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 The issue here is the right to offset, also called setoff. They're the same things. The bank looks at the two accounts which have a similar ownership interest. On the account you and your son have, your son could withdraw the money on deposit. The bank technically owes you and your son that money on deposit when you want it.
Your son has an account with a negative balance. In that account, he owes the bank money, so the bank uses the right to setoff to cancel all or a part of one debt, with another. They take it from one of his accounts, which you happen to be on, and they put it in another of his accounts. It may be that all the money in your joint account was put there by you. That doesn't matter, because he has ownership rights in that money, regardless of where it came from.
When the bank exercises its right to setoff, they'll generally send a notice after the fact. If they did so in advance, most of the time the deposit would be removed by the owner.
The way to correct this is to speak with your bank and your son. If money is still owed, you may have to open another account in just your name, and you should make arrangements with your son for him to repay you. I doubt your bank will provide you any relief there. They were successful in collecting a past due debt. They may however, refund part or all of your fees, created by the setoff transaction.
Published on BankingQuestions.com 11/27/07
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