Compliance is paramount! Errors can cause losses in excess of the loan amount. Do you understand the legal requirements that must be satisfied and the specific steps to take before exercising the right of set off for commercial borrowers?
- Explain which legal requirements must be satisfied before set off is permitted
- Distinguish between contractual and common law rights of set off, and understand the best use of each
- Differentiate between the right of set off and foreclosure of a security interest, and know when it is best to use each method
- List the types of account ownership that are subject to set off
- Determine when your institution can favor itself over competing creditors
Commercial loan delinquencies may be rising, so it’s important to understand the right to set off deposit accounts for these past-due loans. Your institution has a common law right to set off if certain legal requirements are satisfied. In addition, you may have a contractual right to set off, depending on the language in your deposit contracts.
Exercising the right of set off is different from foreclosing on a security interest in the account. Making a mistake could result in losses that far exceed the loan amount. When can your institution apply money in the borrower’s or guarantor’s account to pay past-due loan amounts? Must the borrower or guarantor be notified before your institution exercises this right of set off? If your institution receives a garnishment from another creditor, can you set off the account before honoring the garnishment? This webinar will answer these questions and more.
Elizabeth Fast, JD & CPA, Spencer Fane LLP
Elizabeth Fast is a partner with Spencer Fane LLP where she specializes in the representation of financial institutions. Elizabeth is the head of the firm’s training division.She received her law degree from the University of Kansas and her undergraduate degree from Pittsburg State University. In addition, she has a Master of Business Administration degree and she is a Certified Public Accountant. Before joining Spencer Fane, she was General Counsel, Senior Vice President, and Corporate Secretary of a $9 billion bank with more than 130 branches, where she managed all legal, regulatory, and compliance functions. She is a member of the Missouri State Banking Board by appointment of the Governor.