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Bank Accounts - Right of Offset
The bank took Social Security funds from my checking account and used it to pay on my loan (or other amount owed to the bank). Can the bank do this?
Yes. Under the general banking law of most States, national banks have a legal right to seize any funds that an individual may have on deposit to cover a debt owed to the bank. This is called the right of offset.
This right does not apply to credit card debt.
Generally, the bank will notify the customer, but in some situations, the bank may exercise this right without giving prior notice. It depends on the relationship that the bank has with the customer.
Can a bank take funds from my deposit account and apply it to a debt that I owe to the bank?
Yes. Under the general banking law of most States, national banks can seize any funds from your deposit account to cover a debt you owe to the bank. This is called the right of off-set.
However, this right does not apply to debts incurred by credit card.
In some situations, the bank may exercise the right of offset without giving prior notice to its customers.