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Compliance for Hold on Funds in Deposit Account

What is needed in order to be compliant if the loan department places a hold on funds in a deposit account? For example, a customer is habitually late and has funds in their deposit account (the loan department will place holds on dollars in a deposit account).

Answer from Randy: Normally, a right of offset would apply and the bank could take the funds from the account to satisfy the amount owed. However, if you want to just place a hold on the funds, I suggest you consult your legal counsel. These issues would be governed under State law.


Answer from Andy: I was always taught that setoff is the act of taking the funds. To hold the funds and not apply them is to charge your higher interest per diem, force the borrower to maintain a delinquent loan, and not allow the borrower the use of their money on deposit. As Randy notes this may vary by state, but generally I believe you'll find holding funds without taking them will be frowned upon.

First published on 9/5/11

First published on 09/05/2011

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