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[Remedios]

In a way you are, and you're not 

Right of setoff is primarily used to cover loss from overdrafting checking accounts by using savings account

If CC has security interest clause in the agreement, they could, but that requires court permission. Most dont bother, since  judgement is required. They would have to wait till it's charge off, then proceed with legal action, but if it comes to lawsuit, it's irrelevant where your checking account is, it's safe till judgement. 

At that time, they have the option to size or garnish wages. No different than any other CO

[Credit4Growth]

😅 Right...

The security interest clause is exactly what I was referring to.  I just could not remember the phrasing and obtaining court permission/judgment make sense to me.

I did read such a thing in some applications and wondered if this is how most FI operate.

Thank you for that Remedios!

[Anonymous]

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@Remedios wrote:

In a way you are, and you're not 

Right of setoff is primarily used to cover loss from overdrafting checking accounts by using savings account

If CC has security interest clause in the agreement, they could, but that requires court permission. Most dont bother, since  judgement is required. They would have to wait till it's charge off, then proceed with legal action, but if it comes to lawsuit, it's irrelevant where your checking account is, it's safe till judgement. 

At that time, they have the option to size or garnish wages. No different than any other CO

---

So looking at one of mine:

You grant Us a security interest in all individual and joint share and/or deposit accounts You have with Us now
and in the future to secure Your credit card Account. Shares and deposits in an IRA or any other account that
would lose special tax treatment under state or federal law if given as security are not subject to the security
interest You have given in Your shares and deposits. You may withdraw these other shares unless You are in
default. When You are in default, You authorize Us to apply the balance in these accounts to any amounts due.
For example, if You have an unpaid credit card balance, You agree We may use funds in Your account(s) to pay
any or all of the unpaid balance. 

So @Remedios , they would still need a court order to exercise this?   If so, time for me to go wild!

[FinStar]

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@Anonymous wrote:

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@Remedios wrote:

In a way you are, and you're not 

Right of setoff is primarily used to cover loss from overdrafting checking accounts by using savings account

If CC has security interest clause in the agreement, they could, but that requires court permission. Most dont bother, since  judgement is required. They would have to wait till it's charge off, then proceed with legal action, but if it comes to lawsuit, it's irrelevant where your checking account is, it's safe till judgement. 

At that time, they have the option to size or garnish wages. No different than any other CO

---

So looking at one of mine:

You grant Us a security interest in all individual and joint share and/or deposit accounts You have with Us now
and in the future to secure Your credit card Account. Shares and deposits in an IRA or any other account that
would lose special tax treatment under state or federal law if given as security are not subject to the security
interest You have given in Your shares and deposits. You may withdraw these other shares unless You are in
default. When You are in default, You authorize Us to apply the balance in these accounts to any amounts due.
For example, if You have an unpaid credit card balance, You agree We may use funds in Your account(s) to pay
any or all of the unpaid balance. 

So @Remedios , they would still need a court order to exercise this?   If so, time for me to go wild!

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Is that clause coming from LTL Bank?

[Anonymous]

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@FinStar wrote:

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Is that clause coming from LTL Bank?

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No, ours is the more easy to understand "You agree that We may take all of Your funds, deposited at Our or any other institution, at any time at Our sole discretion.   You also agree that any such funds taken do not discharge any debt, credit card or otherwise, that We choose to decide you owe."

[Anonymous]

Reading more, for credit unions:

To begin, Regulation Z has a general blanket prohibition against offsetting a member's deposit funds to cover the member's delinquent credit card. See, 12 C.F.R. § 1026.12(d)(1). This means that financial institutions cannot automatically take funds from their customer's deposit account if the customer is delinquent on their credit card.

However, the rule has an exception that permits creditors to obtain a consensual security interest. To ensure the consensual security is not a functional equivalent of a right of offset, the regulation requires the following things: (1) member must affirmatively agree to the security interest (i.e., the consensual requirement); (2) creditor must disclose security interest in account-opening disclosures; and (3) creditor must be able to evidence the member is aware and intended to provide the security interest. The regulation also suggests three ways of meeting the last requirement. Basically, the credit union can ensure its members are aware and intend to provide a security interest by doing something substantially similar to one or more of the following:

1. Obtain a separate signature or initials on the agreement indicating that a security interest is being given;
2. Place the security agreement on a separate page, or otherwise separate the security interest provisions from other contract and disclosure provisions; or
3. Make reference to a specific amount of deposited funds or to a specific deposit account number.

The agreement above, from USAlliance, didn't seem to meet those"aware and intend" conditions, but maybe at the time of app they did.

[Remedios]

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@Anonymous wrote:

---

@Remedios wrote:

In a way you are, and you're not 

Right of setoff is primarily used to cover loss from overdrafting checking accounts by using savings account

If CC has security interest clause in the agreement, they could, but that requires court permission. Most dont bother, since  judgement is required. They would have to wait till it's charge off, then proceed with legal action, but if it comes to lawsuit, it's irrelevant where your checking account is, it's safe till judgement. 

At that time, they have the option to size or garnish wages. No different than any other CO

---

So looking at one of mine:

You grant Us a security interest in all individual and joint share and/or deposit accounts You have with Us now
and in the future to secure Your credit card Account. Shares and deposits in an IRA or any other account that
would lose special tax treatment under state or federal law if given as security are not subject to the security
interest You have given in Your shares and deposits. You may withdraw these other shares unless You are in
default. When You are in default, You authorize Us to apply the balance in these accounts to any amounts due.
For example, if You have an unpaid credit card balance, You agree We may use funds in Your account(s) to pay
any or all of the unpaid balance. 

So @Remedios , they would still need a court order to exercise this?   If so, time for me to go wild!

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If that's a CU, no court order needed. 

You agreed when you put your initials/signature.