I have my social security disability check deposited into a bank and I have a loan there, on which I am late. I pay my mortage with this money. I looked into my account today and they withdrew all the money for the loan without warning. Now my mortgage check is going to bounce. Can they legally do this?
Untitled
What the bank has done is exercise the right of offset. Funds in your account are funds the bank owes you. The loan represents funds that you owe the bank. When you are late on your obligation, the bank has a right to offset its obligation against yours, in most states. Many states have laws that restrict that right or require written notice, etc., but your state apparently does not prevent the bank from using offset rights. If you anticipate future problems keeping your loans to the bank current, you might consider relocating your deposit account to a different financial institution, thus protecting it from any exercise of offset rights.
BankingQuestions.com is a free service made possible by the generous support of our advertisers. Advertisers are not responsible for site content. Please help us keep BankingQuestions.com FREE by supporting our advertisers. When you see an ad for a product or service you may have an interest in, click through to learn more.
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
What the bank has done is exercise the right of offset. Funds in your account are funds the bank owes you. The loan represents funds that you owe the bank. When you are late on your obligation, the bank has a right to offset its obligation against yours, in most states. Many states have laws that restrict that right or require written notice, etc., but your state apparently does not prevent the bank from using offset rights. If you anticipate future problems keeping your loans to the bank current, you might consider relocating your deposit account to a different financial institution, thus protecting it from any exercise of offset rights.
