I just read information that stated the right of offset is not allowed on a HELOC with credit card access. Does this apply to secured and unsecured lines with credit card access? and does it apply to lines if no credit card access?

Yes, it applies to secured and unsecured lines with credit card access. It does not apply to lines without credit card access. However, remember that under Reg Z, these provisions apply when the line is tied to a checking account for overdraft protection and the customer can access the checking account (and consequently the line) with a debit card or atm card when the account goes into an overdraft mode.

Yes, it applies to secured and unsecured lines with credit card access. It does not apply to lines without credit card access.

The regulation permits you to create a plan with your borrower to deduct all or part of the credit card debt on a periodic basis by debiting the deposit account.

I agree with Matt's statement; but the right to debit the account can not be used to create an artificial way to "offset" the account if there is a ceedit card/ATM/debit card attached to the account.

Swiggles, the answer to your question at least in MA is that you are correct. MA however has a somewhat unusual Reg E version and I have not checked lately to see if that provision is specific to MA or is part of the federal Reg E.

ahb - it's not a Reg E issue, it's a Reg Z issue and it would not be a State law issue. Refer to 226.12(d).

My understanding is that offset is prohibited for debts incurred under "credit card plans." I don't think of a HELOC with credit card access as a "credit card plan." Section 5a that covers credit cards does not pertain to HELOCs that have plastic access. I would not think that the offset prohibition pertained to HELOCs regardless of plastic access. Any other opinions?

I read the commentary to 12(d)(1).....12(d)(1)3 in the commentary......five times and I'm still not sure exactly what it's telling me, but it seems to agree with Randy's view.

5a is not the only section of Z that covers credit cards. See 226.12. 5a is simply the early DISCLOSURE requirements for credit cards, which excludes (from these early "credit card" disclosure requirements) helocs and some other types of revolving lines that have card access (for example, if the card access is to an overdraft line only or if the card directly accesses the line of credit at an ATM only, as opposed to a point of sale, then 5a exempts these types of lines from the 5a disclosures - 5a(a)(3))). Look at the definition of "credit card" in the regulation ("any card, plate, coupon book, or other single credit device that may be used from time to time to obtain credit")and at the commentary to that (226.2(15)). The commentary gives examples of a "credit card". The first example of a credit card is: "A card that guarantees checks or similar instruments, if the asset account is also tied to an overdraft line or if the instrument directly accesses a line of credit." In ii, the commentary states that a credit card does NOT include: "A check guarantee or debit card with no credit feature or agreement, even if the creditor occasionally honors an inadvertent overdraft."

I want to make sure that I understand this. Sc. 12 uses the term "credit card plan" for the offset prohibition. It prohibits offset against debts incurred under these "plans" whether by plastic or otherwise.

A "home equity plan" in my mind is distinct from a "credit card plan" and debts incurred under a home equity plan would not be subject to the offset prohibition.

This is my opinion. Hopefully, Randy is monitoring this and will set me straight if I am incorrect. If your plan, even a home equity plan, has ANY card access, either indirectly through an asset account, or directly to the line, then the bank has no right of offset regarding any debt incurred on that plan, no matter what method of access is used to incur the debt under the plan. If the plan has NO card access (for example access to the line is limited to requests for transfers or special activator checks) then the bank does not lose its right of offset.

I agree with this interpretation. If there is card access, the Regulation prohibits the right of offset. In the HELOC context, if a borrower accesses the HELOC from a card -- e.g. a Visa card -- the bank cannot offset the cardholder's indebtedness against funds in the account held on deposit at the bank.

That a credit card plan is secured by the cardholder's home -- as in a HELOC -- seems irrelevant under Section 12. It still seems to apply.

Again, I would encourage you to establish a separate writing authorizing you to periodically debit the deposit account to pay the credit account. However, I think the regulation bars you from collecting the (delinquent) credit account by offsetting funds held in the deposit account..

Matt1 and the last Anon are correct. If you can cause an advance on the credit line through the use of a card, either directly or indirectly (i.e., an overdraft protection line), the right of offset is prohibited.