Right of Setoff


Presented by: Mary Beth Guard and Don Pape

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What every banker should know about a bank's setoff rights.

It's oh-so-tempting. Your customer owes you money and there sits his deposit account or CD just begging to be grabbed. Maybe he's terribly delinquent and you want to stem your loss. Perhaps he's current, but you've found an event of default under the contract and you feel a need to act quickly to ensure the bank gets paid. Or maybe he's been paying as agreed with your debt, but now the IRS is coming after him and you envision a tug-of-war over assets. In each of those situations, and many others, you must know precisely what your rights are (or aren't!) with respect to setoff.

In some situations, it is perfectly permissible to exercise a right of setoff against assets you're holding of a customer if the customer owes you money. Seize funds at the wrong time, however, or in the wrong way, and you're headed for a lawsuit. Before you act, you need to understand the three circumstances that must exist before setoff can take place, plus you need to know about special statutory and regulatory provisions that can affect your rights.


Among the topics to be addressed are the following:
  • Three requirements that must always exist for setoff to be proper.
  • Setting off against one deposit account for overdrafts and fees incurred in another.
  • Special provisions that can come into play, such as the Reg Z provision relating to setoff and credit card debt.
  • Contractual provisions to look for on setoff.
  • Consequences of exercising setoff when you shouldn't.
  • Setoff and the bankruptcy preference period.
  • Setoff and the automatic stay in bankruptcy.
  • What are "special deposits" and why should you care?
  • If the customer dies before you perform your setoff and the account has a POD beneficiary, what then?
  • Common mistakes - and how to avoid them.
This Webinar focuses on setoff rights of financial institutions under common law, state statutes, and common contractual provisions. It also addresses limitations on those rights.

The program is designed for personnel within a financial institution who may be involved in decisions regarding setoffs, as well as the process of completing the remedy of setoff, including loan officers, operations officers, legal counsel, and compliance professionals.

About the Speakers: Mary Beth Guard currently serves as Executive Editor of BankersOnline.com and CEO of Glia Group, Inc., Mary Beth has had a long and distinguished career, graduating from law school in 1980. She has focused her work exclusively on the banking industry since 1984. Previously, Mary Beth served as EVP/General Counsel and COO for the Oklahoma Bankers Association, EVP of Specialized Services for Thomson Financial Publishing, and General Counsel for the Oklahoma State Banking Department. Mary Beth is on the advisory board for Bankers' Hotline and Compliance Action, as well as on the editorial board for ABA Bank Compliance magazine. She has presented training programs for virtually every major national financial industry association, as well as more than a dozen state bankers associations and a host of other organizations. In addition, Mary Beth has written more than a thousand banking-related articles and is a BOL Guru.

Donald A. Pape is of counsel to the Oklahoma City law firm, Phillips McFall McCaffrey McVay & Murrah, P.C. and primarily practices banking law and regulation, corporate and securities law with emphasis in mergers and acquisitions. He was born on September 1, 1945 in Birmingham, Alabama. He received a Bachelor of Arts degree in Journalism in 1967 and a Juris Doctorate degree in 1973 from the University of Oklahoma. From 1967 until 1971, he served in the United States Air Force, and was discharged with the rank of Captain.

Mr. Pape is a member of the Cleveland County, Oklahoma County, the Oklahoma and American Bar Associations. He has also been admitted to practice before the United States Supreme Court.

In 1988, he was a founding shareholder and counsel to Republic Bank of Norman, in the acquisition of the assets of the failed Republic National Bank, an $18 million commercial bank from the FDIC. Since that time, Republic Bank & Trust, Norman, Oklahoma has grown to $225 million in total assets. Pape has been Chairman of the Board of Directors since 1990.

In 1995, he was a founding shareholder and counsel of Capital West Securities, Inc., an Oklahoma City broker dealer, which is a current member of the NASD.

He served as a member of the Article 8 Legislative Review Subcommittee of the Oklahoma Bar Association's Financial Institutions and Commercial Law section of the Uniform Commercial Code Committee; He is also a member of the Oklahoma Banking Commissioner's Banking Code Review Committee. While on the Code Review Committee, he authored several of the revised parts of the Oklahoma Banking Code of 1998. He currently serves as Vice-Chair for Policy on the Banker's Advisory Board of the US Conference of State Bank Supervisors.

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CD-ROM Includes:
  • Complete presentation (including slides and audio)
  • Written Materials
  • Follow-up Q & A
You have the right under this license agreement for this CD-ROM to use this presentation on a single-workstation. Use on a network is in violation of the copyright agreements. CD may be used by multiple users at a given institution but may not be placed on a network or in any other multi-user environment.

This program was recorded in its entirety in August 2006. The CD-ROM includes program slides, materials (if available) and follow-up Q & A document.

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  • Model: cd_offset0806
  • Manufactured by: Glia Group, Inc.

This product was added to our catalog on Monday 12 June, 2006.

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