Lender Exercises Setoff Rights To Drain Cash From Unwitting Couple's Bank Account

In Atlanta, Georgia, Next Student Student Loan Blog reports:

• An Atlanta couple has found themselves with their savings wiped out after their bank, Wells Fargo, cleared out their checking account in order to pay a piece of what bank officials maintain is an outstanding student loan (“Suddenly, Bank Account Was Gone,” The Atlanta Journal-Constitution, May 1, 2010).

• After Hope and Matt Hughes had problems trying to make a purchase with their debit card last month, they discovered that Wells Fargo had cleaned them out, withdrawing $4,059.82 — everything they had — from their checking account. They were also hit with $385 in overdraft fees for debit-card purchases they had made on the day their checking account was emptied.

• Wells Fargo appropriated the funds under its right of “setoff,” a prerogative held by most banks that allows a bank to take money from a customer’s savings or checking account in order to pay off any other account — a home mortgage, credit cards, student loans — that the customer holds with the bank that’s overdue.

For more on a bank’s license to help itself to your money, see Wells Fargo Empties Customer’s Checking Account to Pay Delinquent Student Loan.