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Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Consumer Protection Law
Satisfied Customers: 111501
Experience:  Attorney experienced in commercial litigation.
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Looking banks right of offset

Customer Question

looking for Illinois banks right of offset
Submitted: 1 year ago.
Category: Consumer Protection Law
Customer: replied 1 year ago.
I know that right of offset allows a bank to take money from a checking account for any debt due and payable to the bank. I need Illinois State reference. IE Illinois state statute 123xyz right of offset. Bank took money from checking account to pay past due property taxes on a home they held a mortgage on. I know mortgage allows them to pay such things if they chose to. THEN they have many options to recover their money. There was no debt to the bank when they took the money. 1. Banks pays an outside debt 2. There is now a debt to the bank. 3. Bank may claim right of offset and take money from an account. Can you Help?
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
This is covered by (810 ILCS 5/9-340)
Sec. 9-340. Effectiveness of right of recoupment or set-off against deposit account.
(a) Exercise of recoupment or set-off. Except as otherwise provided in subsection (c), a bank with which a deposit account is maintained may exercise any right of recoupment or set-off against a secured party that holds a security interest in the deposit account.
(b) Recoupment or set-off not affected by security interest. Except as otherwise provided in subsection (c), the application of this Article to a security interest in a deposit account does not affect a right of recoupment or set-off of the secured party as to a deposit account maintained with the secured party.
(c) When set-off ineffective. The exercise by a bank of a set-off against a deposit account is ineffective against a secured party that holds a security interest in the deposit account which is perfected by control under Section 9-104(a)(3), if the set-off is based on a claim against the debtor.
This combined with your mortgage contract is what allows them to take a set-off claim from the account for money due that the bank had to pay to a third party.
Customer: replied 1 year ago.
Sir, Banks are not allowed to take money for "outside" debts, banks can only take money for debts owed to them. I overdraw my checking account they can take money from savings, I miss a car payment on a car loan the bank holds, they can take money from checking. I don't pay property taxes, on a home the bank holds a mortgage on,they can pay the taxes, after the taxes are paid a debt to the bank would then exist and they could take money from my account. I am looking for Illinois statute that states a bank may claim right of offset for any debt due to them, or the conditions that must exist in order for a bank to claim offset in Illinois. The above Illinois statute quoted above just isn't what I need.
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
It is not really an outside debt. The mortgage company/bank has a security interest in the property and if property taxes were not paid the property could be lost to a tax sale. As such, to protect their mortgage security interest the bank has a right to pay it, read your mortgage contract, it is in there. Once they paid the property taxes that were delinquent, they can hold you liable as it is now a debt you owe to the mortgage company/bank and it is under that debt they have a right to set-off.
So while the statute above may not be what you want to hear, it is the law that will be applied together with your mortgage contract as the bank has a right to protect their security interest in your home by paying those taxes and then recovering payment from you.
Customer: replied 1 year ago.
Once they paid the property taxes that were delinquent, they can hold you liable as it is now a debt you owe to the mortgage company/bank and it is under that debt they have a right to set-off." Absolutely correct. This is not what the bank did, they took the money before they paid the taxes. Before there was a debt to the bank for which they could claim set-off. They took the money from the account and about a month later paid the taxes. I am looking for Illinois statute that states a bank may only claim right of offset for any debt currently due to them, or the conditions that must exist in order for a bank to claim offset in Illinois. They also filed foreclosure 8 days after a single missed payment due to the fact that they had taken all the money from the account that had been set up to auto pay the mortgage. I got the first ever late payment notice and foreclosure paperwork on the same day. This is not a nice bank.
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
Frequently customers come here wanting statutes worded the way they want them worded. But for every positive statute there is not a negative statute. There is no statute worded the way you want it, despite the fact you may want one worded specifically in a way you want it worded.
So, if the bank did not do what the statute states above, which is indeed the governing statute, and you claim that they did not and that set-off was not authorized, that is still the same statute, It is the only IL statute governing this topic.
Customer: replied 1 year ago.
Sir, In your opinion since the statute simply states that a bank has the right to set off yet, doesn't define the conditions that must exist in order for a bank to claim set off, am I pretty much "screwed"? If I can't prove the banks actions were illegal, they can do whatever they want? I filed complaints and stated the banks actions were illegal, quoted the mortgage section stating the bank must first pay an outside debt before they are entitled to recoupment and they replied saying "right of set off". I do thank-you for your help.
Customer: replied 1 year ago.
I will now quit searching for a statute that doesn't exist.
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
This is the only IL statute that addresses the rights to set off. If the bank made payments to preserve their interests in your property by paying the taxes to avoid a property tax auction, they have a right to do so. They also have a right to pay insurance if a homeowner does not pay their home insurance. These payments are preservation of their security interests in the property.
You have to prove the payments were not proper in order to have a claim against the bank.
I am sorry if the law does not help you, but the above law is an exact copy and paste of what the law says so that you could read it for yourself, because we know that people many times do not believe us when we simply tell them what the law says.
Please do not forget to leave positive feedback, because although the law does not say perhaps what you would have hoped, the experts are not responsible for that and they are not employees of this site and get no credit for spending time with customers unless customers leave positive feedback, which has nothing to do with whether the laws are favorable to a customer or not as the expert can only tell customers what the laws are and help to try to explain them.