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Home >> Manage Your Money >> Debt Management
Freezing my Account: A Show of Power?
I was recently about 45 days late on an auto payment with the same bank that has my checking account. The bank froze my account until they received payment which caused seven checks to be returned at $40 each. The bank gave me no notice prior or after doing this. I had to go to the bank to find out why all these checks were being returned. Just wondering if this allowed or fair? I feel like it was just a show of power by the bank.
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 Some state laws do require a notice of setoff. Setoff is when the bank takes money they owe you, such as in a checking account, and apply it against a debt you owe them, such as a loan. The right to setoff is usually contained in both your deposit agreement and your loan contract.
In this case, you indicate that the bank froze your deposit balance, but didn't actually setoff the funds. This is not quite normal, and because of the fees you paid, it is counter-productive to them being paid. If the freeze on the account was solely due to the delinquent loan payment and if the bank held the funds rather than apply them against the loan, ask why. If you are not satisfied with the answer, ask for a refund of the fees that were caused by their hold on your funds. If they won't do this, ask who their primary regulator is and for an address where you can send a complaint. The agencies have a specific contact for this, an ombudsman. If the bank violated their agreement with you or a state law, the regulator should be able to help rectify this. If they followed the state laws, you will be informed of that as well.
Make those loan payments on time. If you can't, call your lender, explain the problem and make arrangements to catch the payments up to date. Avoiding these problems in the first place is the best plan of action for the future.
Published on BankingQuestions.com 11/14/08
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