Can 'right to offset' be applied to written-off card debt?

Federal law bars banks from taking a customer's funds to satisfy credit card default

The Credit Guy columnist Todd Ossenfort
Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly "The Credit Guy" column, answering reader questions about credit counseling and debt issues.

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Question

Dear Credit Guy,
If I owe a credit card balance to a bank from about eight to 10 years ago that has been written off and sold to another creditor, and I have a current account at that same bank, can the bank take that money out of my savings account? – Mark

Answer

Dear Mark,
In banking terms, what you are describing is a “setoff,” in which the bank takes funds from a customer to satisfy a default on another account that bank owns. Banks ordinarily have the right to offset in order to collect funds that are due, but this practice is not allowed when it comes to credit card debt.

So the short answer to your question is no, the bank cannot take money from your account to repay your credit card balance.

Because your account was written off by the bank and sold, this likely would not have been an issue anyway, since your bank no longer owns the account. The owner is now the debt collector that purchased your account.

Statute of limitations rules

On top of that, if this debt is as old as you say it probably has dropped off your credit report and may no longer be collectible under your state’s statute of limitations rules. You will need to check that to be sure.

In most states this time is between three and 10 years; after that, the debt is time-barred from being collected. This means that, while collectors can still come after you for as long as you still owe, they can’t sue you for payment.

You don’t say in which state you reside, but CreditCards.com has a comprehensive list of credit card debt statutes of limitations by state.

How to proceed with long-standing debt

If the collector is continuing to pursue you for this debt, it could be that the debt is not as old as you think or the collector just is not ready to give up on it quite yet.

What you need to know about the statute of limitations on credit card debt is that the clock starts on the date of the delinquency. This is usually 30 days after a missed payment.

Just because a debt is not collectable because it is time-barred does not mean that the debt has gone away. While the creditor might no longer be able to get a court judgment forcing you to pay, you still owe for this debt and only you can decide when and if you want to make restitution.

However, you need to know that payments of any amount will restart the clock on the statute of limitations. If you are not committed to paying off the debt, you should not start making payments because that will delay the process of it becoming time-barred. It will also likely cause the debt to show up again on your credit report, if it has fallen off.

If you are ready to pay off this debt, my suggestion would be to contact a reputable nonprofit credit counseling agency to help you. CreditCards.com has a list of questions that will help you find the right credit counselor.

Take care of your credit!

See related: Time-barred debt can still do damage even after 13 years, Can I be sued over card debt beyond the statute of limitations?

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Updated: 11-22-2017