The woman I live with has her son as a secondary name for access to a savings account at her credit union in case something happens to her. He contributes no money to this account. The son defaulted on a loan for a motorcycle held at the same institution and returned the vehicle to them. She was not a cosigner on the loan. Today she found out that they have closed her account and taken all the money from it to settle the son's loan and will inform her through the mail. The money was not his and she had no responsibility toward the loan. Is this legal? Can they clean out her account because she has granted him access to it?
Whether or not the credit union was legally able to reach the funds in the savings account depends on what access rights the son had to it.
If he was only a courtesy signer (often called an authorized signer), he had no ownership rights in the account and the credit union's actions would not stand up to legal scrutiny.
However, if he was listed on the credit union's records as a co-owner of the account, the agreement between mother and son that he would only access the account if something happened to her doesn't affect the fact that he had full access rights. That would apparently make the credit union's actions (called an exercise of a right to set off the deposit against the loan) perfectly legal, leaving the matter between the son and his mother.
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Whether or not the credit union was legally able to reach the funds in the savings account depends on what access rights the son had to it.
If he was only a courtesy signer (often called an authorized signer), he had no ownership rights in the account and the credit union's actions would not stand up to legal scrutiny. 