Can they take my money without an agreement?
October 1, 2008 9:06 AM   Subscribe

Can my credit union force me to make payments on my loans they hold?

I maintain a checking and savings account at the local credit union, and have for some time. Additionally, I have an auto loan, a line of credit, and a credit card with them. My wife and I have our paychecks directly deposited to the checking account, but we manually make payments on the three loans. I'm in serious, no-kidding financial distress right now, and am not making payments on any of my other credit cards. In fact, the only thing I am paying, in addition to my mortgage and utilities, is the auto loan with the credit union. I'm sitting down today to write all of my creditors, asking them to renegotiate my outstanding balance, interest, and payments. This will, of course, include the credit union.

So here's the question: Even though there is no automatic payment plan in place, can the credit union take money out of my checking account to make payments for the line of credit and credit card that are in arrears? It will seriously mess me up, if they do, and likely through me into bankruptcy.

I'm in Florida, if it matters.
posted by anonymous to Work & Money (7 answers total)
Read the contract.
posted by JimN2TAW at 9:10 AM on October 1, 2008

First of all I'm sorry you're in this situation and I hope you can get back on track soon. It sounds like you're doing the right thing by paying at least the minimum payment when possible and negotiating with your creditors to see if they will help you out.

Your credit union can automatically pay your credit card minimum for you if that's their policy, but as JimN2TAW said you'll need to check your contract or ask them directly.

If you find out that they are going to do this, you might want to consider opening a new free checking account at a new bank either in person or online, and switching your direct deposit to that account. There is no credit check involved in most cases, and having another checking account does not affect your credit score either. It would be more of a hassle to juggle two accounts, but as you said if the credit union starts forcing you to pay them first you may run into problems.
posted by burnmp3s at 9:33 AM on October 1, 2008

Make a new checking account. On the slim chance that they do overdraft your account or otherwise screw up and you end up in check services because you can't pay the overdraft fee, you won't be able to open a new checking account.
posted by sondrialiac at 9:36 AM on October 1, 2008 [2 favorites]

Definitely check your contract.

When I worked collections at a bank the customer's bank account balance was the first thing we checked and we took whatever we could to get the account up-to-date.

Our deposit agreements and the back of our signature cards specifically stated the bank could debit your account to satisfy overdue debts.
posted by pixlboi at 10:37 AM on October 1, 2008

They probably CAN but whether they WILL is a matter of several factors such as your longevity with them and whether you were able to make regular payments up to now. You're already a leg up by being with a credit union, which will generally be more willing to work with you than most banks.

Instead of your letters, I would start by talking to a banker at the credit union and see what resources they have in the way of credit counseling. Chances are they will be more than happy to help you get set up with a good, trustworthy (non-scam) service. It will be painful but better that than having to claw your way back to having a checking account if that gets taken away.
posted by dhartung at 3:04 PM on October 1, 2008

Seconding dhartung. Go in for a visit, explain your situation, and be straightforward about it -- from their perspective it's a business transaction, and their business partner (you) is addressing the concern directly instead of running and hiding. They'll be more likely to work with you if you handle it in person.
posted by davejay at 4:09 PM on October 1, 2008

You almost certainly agreed to allow all your deposit accounts to be used as collateral. That's pretty standard.
posted by oaf at 12:36 PM on October 3, 2008

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