Definition

Noun: 1. A banking legal right: The legal right of a bank or financial institution to seize funds from a customer's deposit account (such as a checking or savings account) to satisfy a debt that the customer owes to the same bank on a separate, defaulted loan or credit line.

Usage

This term is used in formal banking, legal, and financial contexts. It describes a specific contractual or legal remedy available to a lender. * The bank exercised its right of offset to cover the overdue car loan payment from the customer's checking account. * Before opening the account, the customer reviewed the agreement which included a clause regarding the bank's right of offset.

Advanced Usage

• Contractual vs. Legal Right: The right of offset is typically established by a clause in the account or loan agreement signed by the customer. In some jurisdictions, this right may also be provided by common law or statute.
• Conditions for Exercise: A bank can usually only exercise this right when the loan is in default (e.g., payments are significantly overdue) and after providing any required notice to the customer, as per the agreement or local law.
• "Right of Set-Off": This is a synonymous legal term often used interchangeably with right of offset.

Variants and Related Words

• Set-off (noun): The act of applying one claim against another; synonymous with offset in this context.
• Offset (verb): To use one financial amount to reduce or cancel out another.
  • The bank can offset the debt against the funds in your account.
• Combination Clause: A provision in a bank account agreement that may grant the bank the right to combine or consolidate accounts, which is related to the right of offset.

Synonyms

• Right of set-off
• Banker's right of set-off
• Legal compensation (in some civil law jurisdictions)

Important Notes

• This right generally only applies to debts and deposits held . A bank cannot typically seize funds from an account at a different bank.
• Certain types of accounts, like some trust accounts or accounts holding exempt funds (e.g., Social Security benefits in some jurisdictions), may be protected from offset.

Noun

1. (banking) the legal right of a bank to seize deposited funds to cover a loan that is in default