Questions and Answers
Is any notice required when a financial institution withdraws funds from a checking account under the right of offset on a loan?
Under federal law, the general answer to your question is that there is no mandatory notice requirement when you set off against an account. That being said, it is recommended that you provide notice as soon as possible after you actually set off. A customer who is unaware that you have set off against his or her account may continue write checks on the account. If those checks bounce, the customer could suffer considerable damage and may seek to recover those damages based on your failure to provide notice.
Also keep in mind that there may be notice requirements pursuant to your state law. You should check with your counsel on any notice provisions in your state.
(Posted: 05/10/2008)
