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Debit Auto Loan for Overdrawn Checking Debt?

Can you debit an auto loan for a debt owed on an overdrawn checking account or bad check if it is not specifically disclosed in the auto loan contract? This would increase the balance and interest that may be due on the original contract altering the agreement, correct?

Dan Persfull

If the loan agreement does not specifically address this then what do you think would be your legal authority to do so?

Consult your attorney. Set-off rights generally do not extend to liability accounts.


John Burnett

What you propose sets the concept of setoff on its ear. Setoff presumes that two parties have reciprocal debts. Party A owes money to Party B, and Party B owes money to Party A. In your scenario, the customer owes you money on both accounts. Setoff isn't applicable.

First published on 08/25/2014

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