Exercising the Right of Setoff Against Deposit Accounts

Your institution has a common law right to setoff a depositor’s account for a debt the depositor owed to your institution, provided certain legal requirements are met. In addition, your institution may have a contractual right of setoff, depending on the specific language in its deposit agreements. A debtor defaulting on a loan raises the critical question of when the institution may apply funds from the debtor’s deposit account to past-due loan amounts. This webinar will explain the legal requirements that must be satisfied, and the specific steps the institution must take, before exercising the right of setoff. We will also examine what happens when an account has multiple owners as well as how to manage accounts subject to garnishment by other creditors.