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Home >> Manage Your Money >> Debt Management
Can Bank Pay Collection Company without Approval?
Can a bank give money to a collection company when the bank only has a letter from the company and not a court order?
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 The bank should pay only those persons or entities who have rights to the money, the owners, or those to whom the owners said were entitled to the money, such as someone receiving a check from you. Another possibility is the bank paying someone based on your electronic direction. A health club or life insurance company often gets the authority from the owner to draft, or draw funds, from the account on some periodic basis.
The bank should not, without the specific direction of an owner or a court, pay funds to another. The IRS may have the ability to reach your funds, but this is similar to a court order.
You should verify who the funds were paid to, and ask your bank under what authority they received the money. If they in fact took you to court, even small claims, and you didn't show, you could lose that case by default. The collection company can then get rights to garnish a deposit account and take those funds. Garnishment rights differ from state to state so you may need to see what applies in your state. In some states, a court order may not be required to effect a garnishment order, based on the state laws and the loan contract.
Published on BankingQuestions.com 11/27/07
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