Do banks typically have "cross collateral" clauses?

[cupcake]

The issue of cross collateral came up in one of my other threads. It was suggested that I refinance my car currently financed through Chase because I also have two CCs with Chase that I have now stopped paying. I will stay current with my car payment and I plan to reaffirm after discharge. I thought cross collateral clauses/agreements are typically a credit union thing. Can Chase come after my car if I stop paying on the CCs?

[Cali]

I posted about this in the other thread. You know you can have 1 big thread with all the questions you have.

As for banks doing cross-collateralization, I am not aware of them doing that. I know Credit Unions do this.

[cupcake]

^Yes, I am aware that I can have one thread with all of my questions. The thread you are referring to was titled and about continuing payment on CC debt and it had nothing to do with cross colateralization; people with answers on this issue may have easily overlooked it. I don't open every thread on the forum and I am sure not many people do. And, I posted this new thread prior to you responding in the other.

I didn't realize that it would be such a big deal - sorry.

[deafbroke]

As far as I know credit unions can because they're not for profit. Banks can't because they're not.

Could be wrong but that's my assessment of it.


DB

[cupcake]

Thanks, DB. I panicked a little when it was brought up in the other thread so I wanted some clarification.

[HHM]

Correct, mainline banks, do not, as a rule, have cross collateralization. However, in some circumstances a specific loan or line of credit can be secured by another account at the same institution, but in general, CrossColl is not a standard part of your banking relationship with mainline banks.

[AngelinaCat]

HHM, is this with two different banks or CUs? I know that a checking account+credit card account+loan (car, house, etc.)can be cross-collateraized in the same institution--hense all the advice through here to get the checking/savings accounts moved elsewhere. But are we talking about seperate institutions?

Thanks

[Cali]

Exactly what I said in my post. I learn something on this board. LOL

As far as I know credit unions can because they're not for profit. Banks can't because they're not.

Could be wrong but that's my assessment of it.


DB

[HHM]

HHM, is this with two different banks or CUs? I know that a checking account+credit card account+loan (car, house, etc.)can be cross-collateraized in the same institution--hense all the advice through here to get the checking/savings accounts moved elsewhere. But are we talking about seperate institutions?

Thanks

"secured by another account at the same institution"

To answer the original post question, rarely are stand alone credit cards collateralized against anything tangible. So no, Chase can't come after your car if you stop paying on your Chase credit cards. In fact, even credit unions can't do that. When we talk about cross collateralization, we are talking about a persons "money accounts", i.e. savings, checking etc. Credit unions and banks typically cannot cross collateralize against hard assets because those assets are not in the CU or banks possession.

When it comes to hard assets, the right to execute against such assets for a debt owed is controlled by state law, not your contract with any bank or credit union. To execute against a hard asset, the debtor must directly default on his obligations vis-a-vis that asset, especially when it comes to assets that have state titling requirements, like cars and houses.

So NO, even a credit union cannot repo your car if you default on your mortgage, and vis-versa. If you default on your credit card, they cannot foreclose your home. If CrossColl exists at your institution, about all the bank or CU is authorized to do is take money out of any money account that is with the institution. The bank or CU can only exercise CrossColl on assets that is in the bank or CU's possession. (i.e. your cash).

[southernbelle]

I have a 2nd mortgage with Whitney bank (don't know if that's mainline or not), but they have cross coll. clauses in all of their loans. I didn't find that out until I took out 2 additional loans with them. If I miss a payment on any of my 3 loans, they can foreclose. I'm currently rebuilding my credit and working hard to repay one of them so that I can refinance in about a year or so.

[cupcake]

"secured by another account at the same institution"

To answer the original post question, rarely are stand alone credit cards collateralized against anything tangible. So no, Chase can't come after your car if you stop paying on your Chase credit cards. In fact, even credit unions can't do that. When we talk about cross collateralization, we are talking about a persons "money accounts", i.e. savings, checking etc. Credit unions and banks typically cannot cross collateralize against hard assets because those assets are not in the CU or banks possession.

When it comes to hard assets, the right to execute against such assets for a debt owed is controlled by state law, not your contract with any bank or credit union. To execute against a hard asset, the debtor must directly default on his obligations vis-a-vis that asset, especially when it comes to assets that have state titling requirements, like cars and houses.

So NO, even a credit union cannot repo your car if you default on your mortgage, and vis-versa. If you default on your credit card, they cannot foreclose your home. If CrossColl exists at your institution, about all the bank or CU is authorized to do is take money out of any money account that is with the institution. The bank or CU can only exercise CrossColl on assets that is in the bank or CU's possession. (i.e. your cash).

Wow, thank you so much for that information! That answered all of my questions and confirmed what I initially thought. Thanks, again!

[hnhlvr]

What if your vehicle is paid off? My husband owes to a CU and his truck loan was through there, so we decided to pay it off. Does that mean the CU looses all rights to claim the truck (I did check and there is a cross collateral clause - but it doesn't say if they can reclaim the truck if it's paid off).

[HHM]

I have a 2nd mortgage with Whitney bank (don't know if that's mainline or not), but they have cross coll. clauses in all of their loans. I didn't find that out until I took out 2 additional loans with them. If I miss a payment on any of my 3 loans, they can foreclose. I'm currently rebuilding my credit and working hard to repay one of them so that I can refinance in about a year or so.

I am a little skeptical of the CU's ability to foreclose your home if you do not default on the loans underlying the "recorded" liens. I think the CU would run afoul of various laws regarding secured transactions if they attempt to foreclose on a home based on a default of a loan that is not expressly secured by a lien against the property. The loan agreement may very well say they can do it, but I question whether if push came to shove, if a judge would uphold such a right. Maybe someone can do some googling and find out.

[TEW]

http://creditalliancegroup.blogspot....ion-cross.html

I did some goggling this is one thing I found

I'm not sure how this all applies to a BK if the debt is discharged but you are current on say a car loan.