Can bank take checking $$ for cc?

[justbroke]

Well, maybe someone should sue Bank of America, because they have used their right of offset against my personal checking and savings accounts. Since mine is from actual experience with Bank of America consumer credit products and Bank of America personal checking and savings account... I don't trust that they read their right of offset much.

So either this is new law (post 2008), or Bank of America is violating the law. So my distrust and post is based on experience. Another bank also used it's Right of Offset on an unsecured consumer line of credit against a personal checking account. I have posted about that here as well. That bank is also a nationally chartered bank (N.A.).

[WhatMoney]

Well, maybe someone should sue Bank of America, because they have used their right of offset against my personal checking and savings accounts. Since mine is from actual experience with Bank of America consumer credit products and Bank of America personal checking and savings account... I don't trust that they read their right of offset much.

So either this is new law (post 2008), or Bank of America is violating the law. So my distrust and post is based on experience. Another bank also used it's Right of Offset on an unsecured consumer line of credit against a personal checking account. I have posted about that here as well. That bank is also a nationally chartered bank (N.A.).

If the bank violated the law and you didn't know it, then you fell into their plan perfectly. I believe the law has been in effect since 1981. Below is a the actual wording from the FDIC consumer protection section. Maybe they found a loophole for your case. For example, the law does not apply after the bank obtains a judgment. This offset restriction only applies before you are succesfully sued or have filed for bankruptcy.

Paragraph 12(d)(1)For example, if the terms of a security agreement permitted the card issuer to place a hold on the funds, the hold would not violate the offset prohibition. Similarly, if an order of a bankruptcy court required the card issuer to turn over deposit account funds to the trustee in bankruptcy, the issuer would not violate the regulation by placing a hold on the funds in order to comply with the court order.

2. Funds intended as deposits. If the consumer tenders funds as a deposit (to a checking account, for example), the card issuer may not apply the funds to repay indebtedness on the consumer's credit card account.

3. Types of indebtedness; overdraft accounts. The offset prohibition applies to any indebtedness arising from transactions under a credit card plan, including accrued finance charges and other charges on the account. The prohibition also applies to balances arising from transactions not using the credit card itself but taking place under plans that involve credit cards. For example, if the consumer writes a check that accesses an overdraft line of credit, the resulting indebtedness is subject to the offset prohibition since it is incurred through a credit card plan, even though the consumer did not use an associated check guarantee or debit card.

4. When prohibition applies in case of termination of account. The offset prohibition applies even after the card issuer terminates the cardholder's credit card privileges, if the indebtedness was incurred prior to termination. If the indebtedness was incurred after termination, the prohibition does not apply.

Paragraph 12(d)(2)

http://www.fdic.gov/regulations/laws...6500-2260.html
I haven't found the OCC laws yet, but they should follow the FDIC for Federally chartered banks. Banks can ignore the laws as they please - if you don't object they win.

[justbroke]

Well, someone suggested that the Banks play by the rules, and they don't. There was no judgment. It was a Signature VISA card that was a personal card with an $18K limit.

[ccsjoe]

Got it, thanks everyone. Temporarily switching banks before end of August. JB, thanks for sharing and WhatMoney thanks for the amazing resources. Again, moderator, perhaps this should be a sticky as it applies to federal charter institutions.

[WhatMoney]

Well, someone suggested that the Banks play by the rules, and they don't. There was no judgment. It was a Signature VISA card that was a personal card with an $18K limit.

Well, that "someone" wasn't me. I have too many cases of banks violating State and Federal banking law, either deliberately or through ignorance. That's why we need the new Consumer Protection Agency - so the average citizen without a few million for attorneys and 5 years to sue a bank, stands a chance.

[Bell30656]

Bank of America also closed my checking account and used the funds to offset my Visa card. So did Chase. Of course, neither account had more than $20 in them so they sure didn't get much. Weird thing was that Chase did it on Wednesday, then rejected my payroll direct deposit as account closed. Believe me, I was really happy about how that worked out versus how it could have.

My credit union closed all of my accounts the day they received notification that I filed. I didn't owe them any money so they sent me a check.

I thought I'd have trouble opening a new bank account so I used Skylight Bank on the internet for a while but a local bank opened an account with no questions. Then they were swallowed up by BB&T.

[lorelei]

Useful thread!

I'm not sure what to do. I'm planning on a bankruptcy and I have a checking account, two credit cards (no longer paying), a mortgage (current) and HELOC (current) through BOA.

I also have a checking account and savings account and car loan (current) through a local credit union.

My attorney said that in his experience, big banks like BOA don't typically raid checking/savings accounts when a bankruptcy is filed, but smaller credit unions do.

Currently, my paychecks are automatically deposited into BOA. I would really like to switch them to the credit union, but I'm scared of that now, too. However, if I am current on my car payment, would the CU take the money from my account anyway? Would they have a leg to stand on if I'm not behind in my payments?

Incidentally, my BOA checking account, the mortgages and the credit cards were all obtained through separate (and now defunct) banking and lending institutions. Years of consolidation merged them all together. It always concerned me that it might be dangerous to have one bank have that much power over your financial life. I'm kicking myself now for not doing something about that sooner.

[lorelei]

Now that I think of it, wouldn't it be short-sighted of BOA to close my checking, since I have a mortgage through them as well?

[ccsjoe]

Lorelei,

I used to work at BofA, so I can shed some insight here. The dept. I worked in handled high net-worth clients so we crossed business lines-credit/banking/investments. While I can not firmly tell you that they will take your checking $$ to cross-collateralize the cc debt, I can tell you that you having a mortgage with them will have no effect on their decision. Different departments that don't talk to each other, each dept has production goals and will step on other dept's to meet goals, etc, etc. so please don't think you have less of a risk because of your mortgage relationship tied to your checking.

I think however, that on the credit union side, as long as you remain current with your car payments and you let them know of your intent to continue paying, etc, that it should be fine. Just my opinion regarding the cu though.

[lorelei]

What can I do but laugh? I pay my mortgage as a transfer from one account to another. Getting rid of that option wouldn't really do BOA any favors. *sigh*

[ccsjoe]

Lor, If you are a member of a small enough CU where you know the loan officer or a VP, you may actually just ask them "what would happen if...." and find out their policies. That way you can have your answers up front.

[justbroke]

Please, don't take the chance! Switch banks! I hate to write this, but it's better to be safe, than sorry. Especially when it comes to an account that receives your payroll direct deposit.

[lorelei]

What about the credit union where I have my car loan? They *required* me to have an account with them in order to get the car loan. Would that be safe? Or does it need to be a bank or CU totally unrelated?

[lorelei]

Hate to keep piling on, but another question: Does it matter whether it is a Chapter 7 or Chapter 13 bankruptcy?

[ccsjoe]

Do you know someone at the CU that you can ask? I belong to a pretty small CU and know the loan officer, even asked her what their action timelines are for late payments. I did not tell her that I'm planning on filing and that it will include their cc, but I got a pretty clear idea of how they work.