Can the bank claim money from a personal account to cure an overdraft?
Full Question:
I have 3 accounts with the same bank. The 2 checking accounts had overdraft protection. The business account has had no money in it for some time now due to the economy. My health insurance over drew my account (the business one) $1,400.00. I have made several payments to try to pay it back, but I am not earning money. I have been in contact with two banks to explain that I have work 'just around the corner' and intend on paying the money back soon. My personal account I have kept active with cashing in investments, trying to keep my bills paid, giving everyone just a little. My bank has just taken out of my personal accounts the money I owed them in full, without notifying that they were going to do this, until after the fact, by about 6 days. I am now going to be overdrawn, and bounce checks because I thought I had money in my account. I live in CA, can the bank legally just take my money out of one account because I owe them money in another account without even letting me know? I had been in contact with them about the problem and told I would pay when I can.
04/14/2009 |
Category: Debts and Credit |
State: California |
#15985
Answer:
The answer will be governed by contract law principles. I suggest your read the terms carefully. It is not uncommon for such agreements to contain a security clause, allowing the bank to attach other deposits.
The following is an example clause:
If you ever owe us money as a borrower, guarantor or otherwise, and it becomes due, we have the right under law (called “setoff”) and under this Agreement, you agree to grant us a security interest in your deposit account and authorize us to use the money from your account to pay the debt. We may use the money to pay the debt even if such a withdrawal results in an interest penalty or dishonor of checks or any other obligation that you have incurred. In the case of a partnership or a joint account, each partner or joint account holder agrees that we may use the money in their individual accounts to satisfy obligations of the joint account or partnership account. You agree that the security interest granted by this Agreement is consensual and is in addition to our right of setoff. However, the right of setoff and security interest may not apply to your account if (i) it is an IRA or a tax-deferred Keogh Retirement Account; (ii) the debt is created by a consumer credit transaction under a credit card plan; or (iii) the debtor’s right of withdrawal arises only in a representative capacity.
