Can bank take checking $$ for cc?

[ccsjoe]

Hey all, this may sound like a dumb question to some but I just need to know. We are retaining a lawyer this Fri to file CH7, we are currently still not late with any cc payments but are no longer going to pay, so will be late soon. We have our checking and savings account along with 3 of the 6 cc's to be hopefully discharged at BofA. This is our only checking account, and quite frankly, we love their online bill pay. We both get direct deposit into this checking account. In addition we have a linked ING savings to the BofA checking. Both savings are pretty much down to 0. Checking aoccasionally has funds as we gear up for rent and childcare payments.

Can BofA take money from our checking before we file in order to satisfy their cc's that we are going to start being late on? Do we have to change banks or merely switch from direct deposit to check (and check cashing, etc)?

Thank you

[flyinbroke]

Yes they can. It is cross collaterization, and I bet buried in the fine print that there is something about removing money from one account to cover a delinquency in another at the same bank.

I would advise changing banks. All banks have online bill pay these days.

[Bell30656]

I believe that you better pull that money out right quick, pilgrim. You need to read all the mice type on your card holder agreement but I'd say that you gave them permission to seize whatever you had in the account to satisfy any debt that is outstanding with them.

This is called "Right of Setoff"

Put yourself in their shoes. If someone owes you some money... and you are holding some of their money... Are you going to give it to them?

- Text from a cardholder agreement.

[ccsjoe]

Thank you both. So go open account at another, non-debt related financial institution and redirect all direct deposits there period, then re-link ing with new checking. Got it.

[justbroke]

Yes, it's called right of setoff and the deposits must be in the same Bank. For example, in your case, BofA can take money out of your BofA checking account to pay BofA credit cards. They can't take money out of your INGDirect account unless you made a specific payment.

[WhatMoney]

Actually, NO, in your specific case BOA cannot exercise the right of offset against your personal credit card debt with them, because BOA is a Federally chartered National bank and is regulated by The Office of the Comptroller of the Currency (OCC). The OCC is a bureau of the U.S. Department of the Treasury. The OCC regulations prohibit Federally chartered banks from the right of offset against consumer unsecured debt credit card accounts.

What types of liability accounts or debts does the "Right to Offset" pertain too?

A financial institutions freedom to utilize the "Right of Offset" is determined primarily by how they are chartered.

State chartered and regulated credit unions and banks, along with federal credit unions chartered and regulated by the National Credit Union Association (NCUA) have the freedom and authority to exercise their "Right of Offset" on both secured accounts or asset backed (i.e. mortgage loan, auto loan), and unsecured accounts (not backed by collateral) or open-ended revolving accounts (i.e. certain credit cards and credit extensions).

Federally chartered and regulated banks (i.e. Bank of America, Wachovia Bank, Wells Fargo) have the freedom and authority to exercise their "Right of Offset" on secured, but not unsecured accounts. A bank/financial institutions rights and authority as it pertains to its use of "Right to Offset" may vary between institutions. To find the specifics of a particular institution research the following areas:

* The institutions regulatory authority.
* The institutions member agreement received when establishing an account.
* The institutions loan/debt documents or agreements received when establishing a loan.

You can read the BOA account disclosure to confirm this. Here is the relevant section:

T. Right of Setoff

We may take or setoff funds in any or all of your accounts with us and with our affiliates for direct, indirect and acquired obligations that you owe us, regardless of the source of funds in an account. This provision does not apply to IRA or tax-qualified retirement accounts, to consumer credit card obligations or where otherwise prohibited by law. Your accounts include both accounts you own individually and accounts you own jointly with others. Our setoff rights are in addition to other rights we have under the Agreement to take or charge funds in your account for obligations you owe us.

If the law imposes conditions or limits on our ability to take or setoff funds in your accounts, to the extent that you may do so by contract, you waive those conditions and limits and you authorize us to apply funds in any or all of your accounts with us and with our affiliates to obligations you owe us.

If you are a sole proprietor, we may charge any of your personal or business accounts. We may use funds held in your joint accounts to repay obligations on which any account owner is liable, whether jointly with another or individually. We may use funds held in your individual accounts to repay your obligations to us, whether owed by you individually or jointly with another, including: obligations owed by you arising out of another joint account of which you are a joint owner, even if the obligations are not directly incurred by you; obligations on which you are secondarily liable; and any amounts for which we become liable to any governmental agency or department or any company as a result of recurring payments credited to any of your accounts after the death, legal incapacity or other termination of entitlement of the intended recipient of such funds.

If we take or setoff funds from a time deposit account, we may charge an early withdrawal penalty on the funds withdrawn.

We may take or setoff funds from your account before we pay checks or other items drawn on the account. We are not liable to you for dishonoring items where our action results in insufficient funds in your account to pay your checks and other items.

Some government payments may be protected from attachment, levy or other legal process under federal or state law. If such protections may apply, to the extent that you may do so by contract, you waive these protections and agree that we may take or setoff funds, including federal and state benefit payments, from your accounts to pay overdrafts, fees and other obligations you owe us.

This section does not limit or reduce our rights under applicable law to charge or setoff funds in your accounts with us for direct, indirect and acquired obligations you owe us.

(Note a small business credit card account is not exempt from setoff from personal accounts if you are the business owner.)

And here is another disclosure from another Federally chartered bank:

Agreement Concerning Right of Set-Off

You acknowledge that we have the right to charge or set-off any deposit you have with us for any debts or obligations owed by you to us whether direct or indirect, secured or unsecured, absolute or contingent, joint or several, that are due and payable now or in the future, whether as maker, endorser, guarantor, or otherwise, now existing or hereafter contracted or acquired by us, and wherever payable, and the interest and expense, if any, which may be incurred by us in connection with these debts or obligations. This agreement shall be construed to be your consent to make such a charge of set-off against your account(s) if consent be required by any present or future statute or law. If any provision of this agreement is declared invalid, unenforceable or illegal, that part will not affect the validity, enforceability, or legality of any other provision contained herein. Our right of recoupment or set-off in the deposit account(s) maintained with us has priority over a security interest by another secured party: except as provided under Article 9 of the Uniform Commercial Code if the set-off is based on a claim against you. This right of set-off will not apply to your account(s) if: 1) the debtor's withdrawal right is only in the capacity as representative; 2) this debt is under a credit card plan by consumer credit transaction; or 3) it is an Individual Retirement Account (IRA) or a tax deferred retirement account.

Of course in this forum no one trusts the banks or the law, so they will tell you to switch banks anyway.

[ccsjoe]

Wow, talk about a post....shouldn't that be a sticky since it applies to Federally Chartered Banks in general?

Again, wow. Yes, I will look it up, although yes, I will temporarily change banks or go all cash instead.

[LadyInTheRed]

WhatMoney's post is consistent with what my attorney told me and with information I found on the US Treasury Department's website http://www.helpwithmybank.gov/faqs/banking_offset.html.

Just to be sure, I called BoA to request a copy of my credit card agreement. They didn't hurry to send it to me. When I finally received it, I read every word 4 times and there was no provision allowing offset.

[ccsjoe]

Thanks Lady. I would have to read 3 agreements (we have 1 Amex and 2 Visa's with BofA) to make sure none have that offset agmt language. I guess I can pull my agmts online since I am still current, thus still have account access.

[LadyInTheRed]

Thanks Lady. I would have to read 3 agreements (we have 1 Amex and 2 Visa's with BofA) to make sure none have that offset agmt language. I guess I can pull my agmts online since I am still current, thus still have account access.

I still had online access, but the full account agreement was not available online.

[ccsjoe]

Thank you Lady, learning from others' experiences. I see we're both in the same geographical area. Do you have any experience with the Oakland bk court & trustees?

[Amanda123]

Our credit union (through husband's workplace) just changed from debit to "debit/ Visa" cards. We can use it as our debit, but also for any online things I guess. I recently changed our Netflix and any other 'autopays' over to it, from my Target Visa. When I did that, I could have sworn I saw a bank name associated with the card, but can't find it anywhere. It's not on the card or the statements. We are trying to minimize the calls to the cu (tho we do need a couple of things). Only I will be filing and our atty told us to get my name off temporarily when we file. Now I am afraid the cu card could be hooked up with either Target or Capitol One. I just looked at all the recent changed accts and can't find a bank name.

[ccsjoe]

Not sure where this is headed Amanda, but I can tell you that if it is simply a Debit card with the Visa logo (front of card should say DEBIT), then it is not associated with any credit card issuer. All it means is the debit card can run on the Visa system electronically. Normally, smaller credit unions often have agreements with local banks to allow for the processing of electronic items. For example, a very small cu where I live has an agreement with Bank of the West to process all of its members' electronic transactions (debits, credits, ATM withdrawals, etc.) They are however, in no way affiliated and operate as two separate entities. Hope this helps.

[Amanda123]

Thank you csjoe. Yes, I just called the telephone number on the back of the card and they said it was sponsored by "northshore", but just as you described it. Thank goodness. We are hoping just having the card will help us to mange our finances better. It is certainly more convenient than the old debit card.
I wanted to say also, I'm sorry for piggybacking on your threads. That first one just jolted me out of lurkdom n this forum. I could really identify how you are feeling. This is such new territory. I am so nervous and overwhelmed with gettig the paperwork in order, but also mildly excited at the same time that we finally made a decisiion that will help us move forward.

[LadyInTheRed]

Thank you Lady, learning from others' experiences. I see we're both in the same geographical area. Do you have any experience with the Oakland bk court & trustees?

Yes, but only with the Chap 13 trustee. I see from other posts that you are filing Chap 7, so you'll have a different trustee.