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#1762611 - 11/29/12 05:30 PM Unsecured Consumer Loan
Anonymous
Unregistered


I have an unsecured consumer loan. However, in the TIL it says that "my deposit accounts" are collateral for the loan. Can this be with an unsecured loan?

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#1762616 - 11/29/12 05:36 PM Re: Unsecured Consumer Loan [Re: Anonymous]
rlcarey Offline
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Registered: 07/16/01
Posts: 50760
Loc: Galveston, TX
The bank likely has reserved the right of offset (common law functionality) against any deposit accounts that you may have at the same institution if the loan becomes delinquent.
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The opinions expressed are my own, take them or leave them.

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#1762619 - 11/29/12 05:42 PM Re: Unsecured Consumer Loan [Re: rlcarey]
Doug Hendrickson Offline
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Registered: 10/01/09
Posts: 3419
Loc: NE New Mexico
Just to clarify my own thoughts, the right of offset wouldn't necessarily make it a secured loan, would it? We would only consider the loan secured if a portion of the deposit(s) was limited in some way (e.g., a hold on a savings account). Otherwise, while you may have the right of offset, there may be nothing in the deposit accounts to offset.
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I hear and I forget. I see and I remember. I do and I understand.--Confucius

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#1762623 - 11/29/12 05:46 PM Re: Unsecured Consumer Loan [Re: Anonymous]
rlcarey Offline
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Registered: 07/16/01
Posts: 50760
Loc: Galveston, TX
That is correct and technically, common law rights of offset are not required to be disclosed in the TIL security box. However, most of the major software providers put in that canned language now anyways, i.e., LaserPro for example.
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The opinions expressed are my own, take them or leave them.

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#1762658 - 11/29/12 06:38 PM Re: Unsecured Consumer Loan [Re: Anonymous]
Richard Insley Offline
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Registered: 10/26/00
Posts: 7607
Loc: Richmond, VA
The requirement is to disclose any "security interest", not "collateral." I'm not a lawyer, but always considered the right of offset to be a different legal animal than a security interest.
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#1762669 - 11/29/12 07:30 PM Re: Unsecured Consumer Loan [Re: Anonymous]
rlcarey Offline
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Registered: 07/16/01
Posts: 50760
Loc: Galveston, TX
Richard - It think the major loan doc providers have just taken the easy way out on the offset issue based on this commentary:

"If the creditor is unsure whether a particular interest is a security interest under applicable law (for example, if statutes and case law are either silent or inconclusive on the issue),"
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The opinions expressed are my own, take them or leave them.

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#1762711 - 11/30/12 09:11 AM Re: Unsecured Consumer Loan [Re: Anonymous]
Dan Persfull Offline
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Registered: 08/28/02
Posts: 41086
Loc: Bloomington, IN
Unless you have a security agreement identifying the deposit accounts you are taking a security interest in the FDIC (Chicago Region) will cite you for disclosing a security interest where none exists. Or at least they did us in 2000.

The right to offset is contracted for in a separate section of the note and as Richard indicates it is not a security interest in the accounts.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1763082 - 11/30/12 04:10 PM Re: Unsecured Consumer Loan [Re: Anonymous]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50760
Loc: Galveston, TX
You just shrug with a stupid look on your face and say you are unsure and you should have been off the hook smile I never seen or heard of another bank cited for this and it has been on the standard TIL for years from these vendors.
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The opinions expressed are my own, take them or leave them.

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#1772012 - 01/03/13 12:04 PM Re: Unsecured Consumer Loan [Re: Anonymous]
Cody H Offline
Junior Member

Registered: 08/12/04
Posts: 49
Loc: Texas
Does the right to offset disclosure or note verbiage void the restriction to offset against federal benefits?

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#1772115 - 01/03/13 01:37 PM Re: Unsecured Consumer Loan [Re: Anonymous]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50760
Loc: Galveston, TX
No.
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