Cross-Collateralization / Checking account seizure / Tax refund questions

[lorelei]

Good news!

My state refund hit the bank at 2:30 a.m. At 2:31, I was out the door and headed to the ATM. Cash is in hand! One refund down, one to go.

[DYLAN150]

Dang, you wasted no time on that!

[Clabbergirl]

Looks like you've already got one of your returns so maybe you'll be able to get the IRS amount - only is it small enough to withdraw from an ATM? Either way, good luck on that. I had a checking account with a credit union and my ex-husband had the joint credit card account (as part of divorce decree). He stopped making payments on the credit card and after the 2nd month of no payment to it, the checking account froze a chunk of my checking account money. When I called about it, they told me it was only enough to bring the account current, and of course I was still responsible for the credit card it's a joint account. I explained my situation and released the funds.

That week I opened a new checking and savings account at a bank I do not owe any money to nor had any relationship with previously, and I changed my paycheck direct deposit, student loan funds, bills, EVERYTHING to go to the new account. In a matter of days the account at the credit union was empty with no more funds going into it.

The credit union checking account is frozen and the few pennies left in it were frozen by the bank, and they really were just the $5 join deposit and maybe 60 cents. I hated to burn that bridge because I had a good relationship with the credit union and had been there for years...but I could not afford to have my money sucked out of my account. This is a lesson I learned and will never repeat again - no more borrowing from the institution I bank at! I hope you get your refund out - if you are quick you may do fine.

[discouraged]

I had the same thing Clabbergirl. Had been with the credit union for years and had a cc with them. Also had overdraft protection (@12%), which is why I finally left. I hadn't used the overdraft in about a year as I was staying current with everything and didn't need it. I guess they didn't like that as they put through a payment BEFORE crediting my deposit and thenthrew in 400 to my checking. When I asked why they'd done that, they pretended ignorance, so when a lawyer told me to open a different bank account I did. Unfortunately for the bank, 300 (which is now 350 after 6 months of non payment) will be included in the bk.

I took the money out quietly though - 200 at a time until it was all transferred to my new bank.

Congrats on getting that money out so quickly Lorelei!

[Clabbergirl]

Discouraged, my credit union was sympathetic to my situation (not having the credit card from the divorce), but the bottom line was my name was on it and I was responsible. They released the funds and it took about 2 weeks before they closed an empty account so I can assume they would've frozen that amount in 2 weeks again anyway. I was just relieved beyond relieved that they lifted the freeze long enough for me to get it out. I felt very guilty about this for awhile until one Saturday morning at 8:15 am (after repeatedly telling them to stop calling because I didn't have it and this was harassment) when a man knocked on my front door and asked me when I was going to 'pay this here credit card'. He said we've got to do something about this now. I bid him good day, shut the door, and never looked back. Now the checking and credit card accounts with them are in the BK. They'll have to chase my ex husband for the balance like they should have been all along.

[lorelei]

Happy to report that I have now received my full refunds and rescued them from the bank. While I haven't yet closed the bank account, I'm letting it go inactive. I'm now going with a credit union but will be careful with how much I actually have in that account around the time I file. Thanks for holding my hand and worrying with me through the past few days!

[chicagoannie]

Happy to report that I have now received my full refunds and rescued them from the bank. While I haven't yet closed the bank account, I'm letting it go inactive. I'm now going with a credit union but will be careful with how much I actually have in that account around the time I file. Thanks for holding my hand and worrying with me through the past few days!

I was thinking about you today and wondering if you grabbed your money!

[LadyInTheRed]

I am wondering about the very same with Bank of America. On the 1st of March I will be 18 days late and may have one more check deposited there, hope I am ok and will be at the bank when it opens.

Bank of America is a National bank. National banks cannot cross collateralize on consumer credit card debt. http://www.helpwithmybank.gov/faqs/banking_offset.html

If a bank is not a Federal Bank, it can only cross collateralize if the credit card agreement (or other loan agreement) specifically allows cross-collateralization or you agree in some other written form to allow it.

[WhatMoney]

Bank of America is a National bank. National banks cannot cross collateralize on consumer credit card debt. http://www.helpwithmybank.gov/faqs/banking_offset.html

If a bank is not a Federal Bank, it can only cross collateralize if the credit card agreement (or other loan agreement) specifically allows cross-collateralization or you agree in some other written form to allow it.

Thanks for pointing that out Lady. I was going to say something but trying to convince anyone on this board that there are regulations that protect them is usually a waste of my time. Whether or not a bank can offset your credit card debt from your other deposit accounts at the same bank IS spelled out in the Deposit Account Disclosure that you and the bank have agreed to, but trying to get folks to read the agreement, all that fine print and legalese you know, much less believe the disclosure, is an uphill battle.

The B of A disclosure clearly states they cannot offset a BofA credit card debt from your deposit accounts.

[BKdan]

Bank of America is a National bank. National banks cannot cross collateralize on consumer credit card debt.

If a bank is not a Federal Bank, it can only cross collateralize if the credit card agreement (or other loan agreement) specifically allows cross-collateralization or you agree in some other written form to allow it.

Interesting. I have a B of A checking account and just one week ago they withdrew $650 to go towards a B of A credit card I have with them that is several months past due. I called the checking account customer service and was told I had to talk to the credit card recovery department and she also said that "they could do whatever they wanted". When I talked to them, it was just a typical futile argument and they said that it is written in the fine print that they could in fact do that.

[discouraged]

That's tough BKdan - sorry to hear that. It does convince me that I am doing the right thing by just keeping enough for bills in my account.

Happy to hear you rescued your money Lorelei!

[LadyInTheRed]

Interesting. I have a B of A checking account and just one week ago they withdrew $650 to go towards a B of A credit card I have with them that is several months past due. I called the checking account customer service and was told I had to talk to the credit card recovery department and she also said that "they could do whatever they wanted". When I talked to them, it was just a typical futile argument and they said that it is written in the fine print that they could in fact do that.

Assuming the credit card is a consumer credit card and not a business card, try calling them again and telling them you found the information at the link I posted above and tell them that if they don't return the money to your checking account, you will file a complaint with the OCC. There's a link on that page that you can click to file a complaint online. On the complaint page, there is a phone number you can call with questions. You might want to call and ask for the specific law that prohibits offset so that you can say to the bank "pursuant to blah blah blah, you are prohibited from using a deposit account to offset a consumer credit card account". It's probably a federal regulation.

That's tough BKdan - sorry to hear that. It does convince me that I am doing the right thing by just keeping enough for bills in my account.

Better safe than sorry. Banks don't always follow the law and it's easier to keep them from taking the cash in the first place than to try to get it back after they take it illegally.

[WhatMoney]

Interesting. I have a B of A checking account and just one week ago they withdrew $650 to go towards a B of A credit card I have with them that is several months past due. I called the checking account customer service and was told I had to talk to the credit card recovery department and she also said that "they could do whatever they wanted". When I talked to them, it was just a typical futile argument and they said that it is written in the fine print that they could in fact do that.

The customer service rep is wrong. Trained monkeys do not know the regulations.

B of A has violated their own disclosure agreement, AND have violated Regulation Z, specifically Regulation Z, Section 226.12d(1):

Regulation Z
Truth in Lending Act

Subpart B--Open-End Credit

Section 226.5 - General disclosure requirements.
Section 226.5a - Credit and charge card applications and solicitations.
Section 226.5b - Requirements for home equity plans.
Section 226.6 - Initial disclosure statement.
Section 226.7 - Periodic statement.
Section 226.8 - Identification of transactions.
Section 226.9 - Subsequent disclosure requirements.
Section 226.10 - Prompt crediting of payments.
Section 226.11 - Treatment of credit balances.
Section 226.12 - Special credit card provisions.
Section 226.13 - Billing error resolution.
Section 226.14 - Determination of annual percentage rate.
Section 226.15 - Right of rescission.
Section 226.16 - Advertising.

Subpart B--Open-End Credit
...
Sec. 226.12 Special credit card provisions.
...
(d) Offsets by card issuer prohibited.
(1) A card issuer may not take any action, either before or after termination of credit card privileges, to offset a cardholder's indebtedness arising from a consumer credit transaction under the relevant credit card plan against funds of the cardholder held on deposit with the card issuer.
(2) This paragraph does not alter or affect the right of a card issuer acting under state or Federal law to do any of the following with regard to funds of a cardholder held on deposit with the card issuer if the same procedure is constitutionally available to creditors generally: obtain or enforce a consensual security interest in the funds; attach or otherwise levy upon the funds; or obtain or enforce a court order relating to the funds.
(3) This paragraph does not prohibit a plan, if authorized in writing by the cardholder, under which the card issuer may periodically deduct all or part of the cardholder's credit card debt from a deposit account held with the card issuer (subject to the limitations in Sec. 226.13(d)(1)).

You can find Regulation Z, the Truth In Lending Act here:

http://www.cardreport.com/laws/tila/tila2.html#226.12


And from B of A's own Deposit Agreement and Disclosures Agreement:

Effective June 19, 2010

Arizona, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia and Washington D.C.


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.

So B of A specifically tells you they cannot offset and take your deposit account funds to pay your credit card debts, per Regulation Z as above. Then they add a confusing paragraph that you waive some conditions and limits. Any attorneys willing to interpret this confusing second paragraph? BofA cannot tell you they obey Reg. Z and then ask you to waive your rights to Reg. Z.

https://www3.bankofamerica.com/efulf...1&view=htm#19t

And finally, If you are a customer of a national bank and have questions about a bank’s right of offset, you can contact the Office of the Comptroller of the Currency, Customer Assistance Group, at 1-800-613-6743.

Do not let BofA illegally seize your money. Fight those bastards.

[lorelei]

Very helpful stuff. I don't regret pulling my funds out, but knowing all of this would have given me a few more peaceful nights. Thanks!

[meateater]

When I realized I was likely going to file, I opened a new account at a small regional bank and had my direct deposit go to that bank. That's still my primary account (although the bank has been bought and sold several times). I do not have overdraft protection or a credit card with that bank, and use it only as a bank account.

In hindsight, I realize I had been using overdraft protaction as a line of credit. I'm now on financially solid ground, I think part of my success has been limiting the bank products I use. For folks just starting the journey into and out of BK, I encourage you to consider opening a new bank account and using it only as a bank account, without overdraft or credit; it made me be much more conscietious as to my budget because I knew that once the money ran out, there would be no bailout in the form of overdraft or credit line.