Can a bank take a credit balance from a loan and apply it to pay down a delinquent or charged off loan with the same customer? Are there any regulatory issues involved or would it just be dictated by the loan contracts?

Thanks.

It will be dictated by your right of offset in the loan contract.

Okay. I was thinking that the right of offset only applied between loans and deposit accounts. But I went out and read a few descriptions and see that the deposit account is viewed as the bank's debt to the customer, so it applies where each party owes a debt to the other (including a loan with a credit balance). Thanks!