Right of Offset

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Mark Cappel
Feb 20, 2009
Key Takeaways:
  • Understand that federal law regulates a bank's right to offset.
  • Be aware that the laws may vary for Credit Unions.
  • Consult with an attorney, to find out your state's laws about the right of offset.
I have a credit card with the same bank that I save money, can they debit my account if I am late on the credit card?

If I have multiple accounts with a bank that have funds in them and I have an auto loan with the same institution and i have just gone late on my first payment. Can the bank automatically deduct the payment from one of my accounts? and if so, how soon can they take action?

Federal law limits how banks can use funds in a consumer's deposit account to pay a delinquent debt with the same bank. In many cases, a bank can withdraw funds held in a consumer's checking, savings, or investment account, to pay any delinquency which has accrued on secured debts owed by the same creditor. A bank’s ability to take such action is referred to as the "right of offset."

Federal law restricts the application of the right of offset, preventing federally chartered banks (such as Bank of America, Wells Fargo, etc.) from using the right of offset to collect of delinquent revolving debts, such as credit cards. However, since the loan in question is an auto loan, it is quite possible that the bank has every right to withdraw funds from your deposit accounts to bring your loan current.

Review your auto loan contract and deposit account agreements, as these documents should outline the bank's right of offset in case of delinquency on your secured loan. To read more about banks' right of offset for various types of debt, see the Office of the Comptroller of the Currency's document Answers About the Right of Offset.

Smaller financial institutions, such as credit unions and state chartered banks, often have much more freedom in offsetting delinquent debts against a consumer’s deposit accounts. Unlike national banks, which are chartered by the Office of the Comptroller of Currency, credit unions and state chartered banks are regulated under various state and federal laws, many of which do allow for the offset of deposit accounts for payment of delinquent unsecured debts, such as credit cards.

Even federal credit unions, which are chartered and regulated by the National Credit Union Association, have much more freedom to offset customer debts than national banking associations. Because of the various laws regulating state chartered banks and credit unions, you may wish to consult with an attorney licensed in your state to discuss your state's laws regarding a creditor's right to offset.


Since you are only one month behind on your auto note, the easiest was to prevent any further collection activity by the lender, including possible offset against other accounts, would be to pay the debt. If you cannot afford to bring the loan current in a single payment, the lender may be willing to work with you in establishing an affordable repayment plan.

I hope this information helps you Find. Learn & Save.




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JJerry, Nov, 2019

My bank took money out of my LLC account. For a personal loan I had in my name not the LLC. That is against the rules, correct? An LLC is its own entity.

DDaniel Cohen, Nov, 2019

You asked your question on a page we have about the right of offset. It could be that  there is language in the account agreements you have wtih the bank that gives it the authoirity to collect a debt owed for the corporate account from your personal account. You need to speak with a lawyer and show him or her the two account agreements or ask if there is another reason the bank has claim to your private account for the corporation's debt.

AAdi, Mar, 2014
I have a question about Wells Fargo...They have recently used the "Right to Offset" and taken money out of my Wells Fargo Business Checking Acct to pay off a delinquent Wells Fargo Business Credit Card. I read your article and I am unsure, but is this something they can do? Nobody ever notified me and my account shows it was a telephone transaction. When I called, all they had to say was that it was done. Nobody has given me an answer as to why they can do this.Please help!!
BBill, Mar, 2014
It depends on the language in your account agreements. It is my guess that there is language that allows Wells Fargo to assert a right of offset. A lawyer could examine your account agreement documents and offer an authoritative opinion.
LLauren, Feb, 2014
Hi. My dad lives in Florida and is 78. He got behind in his bills. Lives in poverty conditions. He gets $1000 a month between Social Security (direct deposit) and disability. He has a mortgage and equity line at Bank of America. He had $2000 in a checking/debit account, from last 2 months of benefits. Bank of America took all his funds today. He has no money, not even for food. Electric and water were previously shut off, and he was just getting someone to help him pay his basic bills,and $$ was used for bare necessities. Now there is no money to turn on electricity or water. Can the bank legally seize these funds thru right of offset? He was overdue on mortgage and equity line at Bank of America. Can they take his Social Security/disability income? Thank you.
BBill, Feb, 2014
Help your father find a Florida lawyer immediately. Contact Florida Legal Services or another Florida pro bono program to find an organization that will help him at no cost.
EEric Debernitz, Sep, 2013
I've taken over of the estate now that my dad has passed on. There are several credit cards with some debt who I would simply like to inform that the owner has passed on and they have to eat the debt. However, the bank for one of the cards holds our mortgage, and my service rep (at another bank) mentioned that I need to be careful because the bank may simply put a lien on my home for my father's credit card debt. Should I refi with another bank first or liquidate the estate or what? I'd like to protect my house from my father's unsecured debt and would rather just blow them off and keep my inheritance for my family.
BBill, Sep, 2013
I don't see the right of offset as being an issue here.

You oversimplify the probate process and your duties as the executor/administrator/conservator of the decedent's estate. Follow the hyperlink I just mentioned to learn more about the probate process in general. You indicated you reside in California, and I will make a big assumption that your father was a California resident, too. See the Sacramento Library's Decedents' Estates page to learn more about California's probate laws.

Should you fail to follow the probate laws in the state where your father resided, it is possible for creditors to file a lawsuit against you as the executor/administrator/conservator for failure to comply with the law in the discharge of your duties. If the court agrees, you could have personal liability for the estate's debts.

My advice? Consult with a probate lawyer in the state where your father resided, so that you get a complete understanding of your duties as executor/administrator/conservator, the probate laws in that state, and the possible consequences for failure to follow state probate laws.