Can you use setoff?


Presented by:
Mary Beth Guard

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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.

About the Speaker: Mary Beth Guard currently serves as Executive Editor of and CEO of Glia Group, Inc., Mary Beth has had a long and distinguished career, graduating from law school in 1980, then going on to serve as general counsel for the Oklahoma State Banking Department, general counsel for the Oklahoma Bankers Association, and EVP of Specialized services for Thomson Financial Publishing prior to co-founding Glia Group, Inc. and Mary Beth also serves as Executive Editor for and as a partner in BankGuard Resources.

Mary Beth is on the advisory board for Bankers' Hotline. 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.

This program was recorded in its entirety in June 2020. The CD-ROM includes program slides, materials (if available) and follow-up Q & A document.

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  • Model: cd_setoff0220
  • Manufactured by: Glia Group, Inc.

This product was added to our catalog on Monday 24 February, 2020.

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