A large number of credit cards are issued by banks or credit unions which also have checking and savings accounts with the card holders. The credit card agreement typically contains a broad provision allowing the bank or credit union to “setoff” or take money out of the card holders checking or savings account if the payments are not made timely. However, a federal law prohibits setoffs in connection with credit card accounts.
The Fair Credit Billing Act (FCBA) prohibits a card issuer from removing funds out of a deposit account to satisfy its credit card claims. This prohibition is very broad and contains only minimal exceptions. For instance, the bank is prevented from exercising set off after the termination of the credit card, unless the debtor has incurred additional debt after termination of the card. The law also prevents financial institutions from taking money the consumer intends to deposit, before it is formally deposited.
The offset prohibition is very broad. It covers any plan with a credit card, even where the debt is not the result of credit card use. Practically, this situation would arise when a check drawn on an account with insufficient funds triggers an overdraft line of credit on the checking account. In this situation, the bank is prevented from setting off the debt against the customer’s deposit.
One of the exceptions to the set off prohibition arises when a cardholder has previously authorized the automatic payment of a credit card account from a deposit account. The authorization for an automatic payment plan must be in writing and signed or initialed by the cardholder. However, a card issuer is prevented from taking out the automatic payment with respect to a disputed amount if the consumer has provided timely notice of the dispute.
If you have a bank account and a credit card issued by the same bank in Virginia, you need to review your agreement and make sure that you have not authorized the bank to take funds out of your account to pay your credit card debt. If you are struggling to pay your credit cards, it may be time to file a Chapter 7 or Chapter 13 bankruptcy. Contact Hampton Roads Legal Services today at 757-320-2010 to schedule free consultation to see if bankruptcy will help you.