Can my bank take money out of my checking account to cover another account that I had with them that was charged off?

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Can my bank take money out of my checking account to cover another account that I had with them that was charged off?

My ex-husband and I had a bank account at a bank and it had became overdrawn and was charged off 2 years ago. I recently went to this bank and opened a checking and savings acct with my new husband. Today the bank’s recovery department took everything from my accounts. Left me nothing. The girl at the bank that opened my account said this did not show up when she ran it through their system when I opened the new account. Can they do this legally? If not what should I do? I told them I can do payment arrangements but they insist I must pay a settled amount by next week or they will continue taking my money.

Asked on June 21, 2011 under Business Law, Louisiana

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The first key issue is what did the agreement under which you opened the new account say? If  it stated that the bank could take money from the account to pay off debts to the bank, then they have the power to do this. If however you never agreed to give them this authority, they would seem to not be able to. Therefore, you need to look to the agreement governing the account--including it's "fine  print"--and should also look to the agreement covering the older account, the one that was closed, to make sure there was no grant of authority there. You can ask the bank to show you the terms of whichever agreement(s) they say give them this power, since they need a basis for doing this. Note that it's common for a bank account agreement to give a bank the power to have recourse to the account for money owed it.

Second, even if they had the power to do this, IF the prior account was truly "charged off" by the bank, then they can no longer seek payment on it. When a debt is charged off, the creditor declares it uncollectible and gets a tax write off. Howver, if the bank did not actually charge it off, but simply stopped trying to collect (while keeping it open on their books), then they may be able to take your money, if they otherwise have the authority.


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