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Money Transferred without Authorization: Legal?

I am the co-signer for my daughter's car loan. We both bank at the same institution and I noticed that some of the money in my savings was transferred to my daughter's loan to cover the payment. Can the bank make this transfer without my authorization?

There are a couple of things that might have happened here. First, check to see whether you signed an authorization to have funds pulled from your account if your daughter missed a payment.

Secondly, it's possible the bank is exercising a set-off (some call it offset) against your account to collect delinquent payments on the loan for which you co-signed. The laws on when and how set-off can be used vary from state to state, and the loan contract (and your deposit contract) may have provisions relating to it.

Your best bet is to ask the bank why it took the funds. Assuming that your daughter missed a payment, you should probably keep a vigilant eye on the loan to ensure that payments are kept current, or you could experience this problem again.

Published on 8/30/07