If you have a defaulted loan, is it fair for your bank to take funds from one account to cover that debt? It happened to one woman in Clearwater, CA who banks with Wells Fargo.
Margaret Zurro was shocked to see unavailable funds from her two certificates of deposits valued at $40,000 when she went to visit Wells Fargo. She then found out the bank took the money out due to her sister, Linda Pisantos, defaulting on a home loan. Pisantos’ name was on the certificate of deposit, but only as the person to receive the money in the event of Zurro’s death.
Now, Zurro is suing Wells Fargo and claims the bank had no right to take money out of her CD.
Is this legal?
The truth is, banks have the right to take out money from one account to cover an unpaid balance or default from another account. This is only legal when a person possesses two or more different accounts with the same bank. So if you have two accounts with Wells Fargo, and one defaults, the bank has the right to take money out of another on of your accounts to cover the difference.
If you have two separate accounts with two different banks, you don’t need to worry about this happening to you. In other words, if you have one account with Chase, and a separate account with Wells Fargo, neither bank can take money out from the other to cover a defaulted loan or unpaid balance.
The power banks should possess when it comes to your money
For Zurro, it seemed unfair that the bank took money from her account, since all she did was make her sister the beneficiary of the CD in the event of her death. While I do agree that banks have the right to take money from one account to pay for the balance of unpaid debt, I also feel there should be a limit. The limit to how much a bank can take should either be a fixed amount, or a percentage of the overall balance.
I don’t think banks should be allowed to take more than 50 percent of a balance held in one account to pay for an unpaid balance in another. So if someone owed $100,000 on a home loan, and also had a CD with an amount of $50,000, the bank shouldn’t be able to take more than 50 percent of the balance held in the CD, (which would be $25,000).
How to prevent a bank from taking your money
The easiest way to prevent something like this from happening to you is to simply avoid taking out a home loan where you have a checking, savings, CD, a retirement account, or investments.
Calling your bank directly can work in your favor more than you think. By calling to discuss the status of your defaulted accounts, or negative balance, you can work out a solution with your bank to avoid causing this type of dilemma. As long as you make an effort to show banks you are willing to pay them back, they are less likely to take drastic actions like pulling money directly out of another account.
How do you feel about Margaret Zurro’s situation? Was it fair for Wells Fargo to take money out of her CD? Let us know in the comments, or chime in on our Facebook page.