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#770 - 02/24/01 02:01 AM Setoff
Andy_Z Offline
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I'm not sure if we are fishing for the occasional anomaly here or what, but I've been asked some odd setoff questions.

As they pertain to consumer loans and overdrafts, are there any prohibitions against setoff other than not effecting IRAs?

I was asked about a setoff against a CD. I've never done that except when I accelerated a loan. Is there any reason you couldn't setoff against a part of a CD, leaving the remainder in tact? Is there any requirement to waive any penalty on the CD if you do this? Although I would not want to "go back to the well" so to speak each month, we are talking about using the computer system to look for deposits on overdrafts and doing the setoff automatically. This could cause regular debits against a CD. Any problems there?

Andy Zavoina
Opinions stated are not necessarily that of my employer.

My opinions are not necessarily my employers.
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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General Discussion
#771 - 02/26/01 03:05 PM Re: Setoff
John Burnett Online
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John Burnett
Joined: Oct 2000
Posts: 39,801
Cape Cod
The first time you used setoff to recover an overdraft from a CD, you'd have some explaining to do -- not to regulators or lawyers, probably, but to your customer, who will now be in a "Catch 22."
You tell the customer that you had the right to do it. The customer says "OK, then I want my CD closed out early so my money is protected." You counter with "You can't withdraw early from the CD," or you say "If you close the CD early, you'll pay a penalty." The customer's money is being held hostage.
Yeah, I know the tempting comeback is, " Maintain your checking account properly, and you have no problem."
I guess my concern here is that no one wins this spitting match, especially if the customers start ccomplaining to the outside world.

[This message has been edited by John Burnett (edited 02-26-2001).]

John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8

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