Offsetting One DDA Account With Another Without Customer Notification

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Question:

Can a financial institution offset funds in one DDA acct with another DDA account containing a positive balance without notification to the customer? Overdraft account customer is a joint account of another account. The positive account receives a Social Security check direct deposited which provided the funds to offset the overdrafted account.

Answer:

State law may limit or govern an offset of one account against another. You should check with local counsel.

In your example, X&Y have a good balance, and Y has another, overdrawn account. Your state law might not make the X&Y account available to you.

The question of Social Security direct deposit into the account with the good balance is probably moot, now that the 9th district seems to have come to its senses.

First published on BankersOnline.com 9/16/02