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Frequent Contributor
krystofur
Posts: 387
Registered: ‎08-10-2007
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Are all PenFed Cards "secured"?

I received Penfed's "Authorization for Credit Card" form in the mail today.  They need us to sign it and send it back.  One of the lines that jumped out at me reads: "I authorize a security interest in the pentagon federal share account listed above and any other penfed accounts I may have up to the amount of my outstanding balance to protect pentagon federal if I default on any credit extended or cash advanced under my credit account(s)".  Is this normal? 

Valued Contributor
chasmith
Posts: 1,062
Registered: ‎05-26-2010
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Re: Are all PenFed Cards "secured"?

I believe that's fairly common for Credit Unions.  I don't have PenFed but Navy Federal has the same cross-collateralization.

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
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Senior Contributor
O6
Posts: 3,626
Registered: ‎10-13-2009
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Re: Are all PenFed Cards "secured"?


krystofur wrote:

I received Penfed's "Authorization for Credit Card" form in the mail today.  They need us to sign it and send it back.  One of the lines that jumped out at me reads: "I authorize a security interest in the pentagon federal share account listed above and any other penfed accounts I may have up to the amount of my outstanding balance to protect pentagon federal if I default on any credit extended or cash advanced under my credit account(s)".  Is this normal? 


Very common for almost every financial institution.  If you default they have right of offset against any other cash / property you have with them.

IAALBNYL
Valued Contributor
chasmith
Posts: 1,062
Registered: ‎05-26-2010
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Re: Are all PenFed Cards "secured"?

That's called the "Bankers' Right of Offset.  I can't point you to a citation but I understand from my BK attorney that Banks (but the restriction doesn't apply to Credit Unions) cannot "offset" personal credit card accounts against personal account balances.  The rationale is probably that Banks are for-profit, Credit Unions are non-profit, member-owned (or have better lobbyists).

 

So we see this a lot more from Credit Unions, it may be part of the reason they are able to offer lower rates.

 

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
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Valued Contributor
chasmith
Posts: 1,062
Registered: ‎05-26-2010
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Re: Are all PenFed Cards "secured"?

OK, It's been bugging me that I can't back up the "Banks can't offset for personal crdit cards.  A Bing search brought up this from the OCC website:

 

May a bank take money from my deposit account to make a payment on a loan that I owe to the bank?

Usually, yes.  Generally, a bank may take money from your deposit account to make a payment on a separate debt that you owe to the bank, such as a car loan, if you are not paying that loan on time.  This is called the right of offset.

In some situations, the bank can exercise the right of offset without letting a customer know in advance that it is going to do it.

However, federal law limits what a bank can do in some cases.  For example, federal law won’t allow a bank to offset your deposit account to pay off your consumer credit card account.

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
Take the FICO Fitness Challenge
Senior Contributor
O6
Posts: 3,626
Registered: ‎10-13-2009
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Re: Are all PenFed Cards "secured"?

 


chasmith wrote:

OK, It's been bugging me that I can't back up the "Banks can't offset for personal crdit cards.  A Bing search brought up this from the OCC website:

 

May a bank take money from my deposit account to make a payment on a loan that I owe to the bank?

Usually, yes.  Generally, a bank may take money from your deposit account to make a payment on a separate debt that you owe to the bank, such as a car loan, if you are not paying that loan on time.  This is called the right of offset.

In some situations, the bank can exercise the right of offset without letting a customer know in advance that it is going to do it.

However, federal law limits what a bank can do in some cases.  For example, federal law won’t allow a bank to offset your deposit account to pay off your consumer credit card account.


 

It is called Regulation Z

 

Regulation Z  [12 CFR 226.12(d)]  prohibits a bank from offsetting card holder deposits unless it has a security interest in the cardholder’s deposit account unless it has a security interest in the cardholder’s deposit account.  The problem is that most, if not all, credit card agreements where the issuer is a major bank perfect a security interest in deposit accounts by means of their credit card agreement.

 

Specifically, Regulation Z allows offset against a deposit account:

 

1. To obtain or enforce a consensual security interest in the funds;

2.  Attach or otherwise levy upon the funds; or

3.  Obtain or enforce a court order relating to the funds.

 

It is important to note that in some jurisdictions a levy can be had with extremely minimal initial judicial intervention.

IAALBNYL

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