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#1286242 - 11/13/09 06:26 PM Right of offset - ODP
Tryin-2-Comply Offline
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Hills of TN
My understanding is REG Z prohibits use of the "right of offset" to pay from a DDA to an unsecured revolving credit line.

Am i understanding this correctly?

We have an unsecured revolving line of credit loan - where the customer is past due - the lender wants to take the deposit funds.

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#1286258 - 11/13/09 06:34 PM Re: Right of offset - ODP Tryin-2-Comply
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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226.12 d prohibits offset for credit card debt.
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#1286897 - 11/16/09 03:18 PM Re: Right of offset - ODP Kathleen O. Blanchard
Glutes Offline
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Glutes
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Texas
I hope you don't mind me taggng my question alongside yours D&C.

A customer is past due and the lender wants us to take a payment from the customers account which should be allowed. Problem is the account doesn't have sufficient funds. Lender wants to overdraw the borrower's DDA account to make the payment. Is overdrawing a borrower's deposit account to make a loan payment allowed?

Thanks.

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#1286914 - 11/16/09 03:34 PM Re: Right of offset - ODP Glutes
Dan Persfull Offline
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Bloomington, IN
The right of offset, if it exists, only allows you access to available funds.
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#1286923 - 11/16/09 03:44 PM Re: Right of offset - ODP Dan Persfull
Kathleen O. Blanchard Offline

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And it would be rather silly if it were allowed. The bank would be paying itself. The customer would owe the OD amount, of course, but they already owe money. The bank would be bring something current with borrowed funds...not a good idea.
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Kathleen O. Blanchard, CRCM "Kaybee"
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The HMDA Academy
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#1286927 - 11/16/09 03:49 PM Re: Right of offset - ODP Kathleen O. Blanchard
rlcarey Online
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Galveston, TX
Not to mention if the loan account is secured - you are turning a secured loan into an unsecured loan. It also misstates your past due situation and if you a SOX bank (and even if you are not), your internal controls should not let this happen.
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#1287027 - 11/16/09 04:53 PM Re: Right of offset - ODP rlcarey
Glutes Offline
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Glutes
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Texas
Thanks for the responses.

That's pretty much what I needed to know.

Outside of this practice just being all around screwy (also what Randy stated about mistating a past due situation), there is really no legal right to offset against monies that are not there. If the deposit account has a $0.00, then you can't take a loan payment from money that is not there. There is no offset right there. Correct?

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#1287073 - 11/16/09 05:23 PM Re: Right of offset - ODP Glutes
rlcarey Online
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rlcarey
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Galveston, TX
Correct.
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#1287363 - 11/16/09 08:43 PM Re: Right of offset - ODP rlcarey
Glutes Offline
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Texas
Thanks Randy.

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