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Home >> Lending >> Home Mortgage
Bank Offsets and Overdrafts for Late Payment
We were late with a mortgage payment and our bank took funds from our business checking account. We understand this is legal; however, we did not have sufficient funds in the account to cover the payment, and now we have a $1700 overdrawn balance. We were also charged a $30 overdraft fee. This somehow seems illegal or unethical. Do we have any recourse?
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 If the account ownership on the deposit and the loan are the same, the bank has the right to setoff the account. If the deposit account has overdraft protection, that is a separate issue from setoff. From the banker's perspective, if a check had come, in it would have been paid, so their debit for the mortgage payment should be paid and the account would go into the negative.
The NSF fee may be less than the interest on the mortgage loan. Plus, your mortgage won't be reported as a past due loan. You'll have to do the math to see if this was better or worse for you.
Again, these are two separate issues and unless your state laws prevent it, you can only voice your opposition to the bank and vote with your wallet. Make payment arrangements, if you believe you'll be past due, so that the bank doesn't resort to this.
Published on BankingQuestions.com 7/14/10
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