A bank may have a right of set-off against a depositor’s accounts if the bank disclosed the right and the depositor defaulted, but it may not use that right in some account-capacity situations.
Sec. 34.307. RIGHT OF SET-OFF. (a) Except as otherwise provided by the Truth in Lending Act (15 U.S.C. Section 1601 et seq.) or other federal law, a bank has a right of set-off, without further agreement or action, against all accounts owned by a depositor to whom or on whose behalf the bank has made an advance of money by loan, overdraft, or otherwise if the bank has previously disclosed this right to the depositor. If the depositor defaults in the repayment or satisfaction of the obligation, the bank, without notice to or consent of the depositor, may set off or cancel on its books all or part of the accounts owned by the depositor and apply the value of the accounts in payment of and to the extent of the obligation. (b) For purposes of this section, a default occurs when an obligor has failed to make a payment as provided by the terms of the loan or other credit obligation and a grace period provided for by the agreement or law has expired. An obligation is not required to be accelerated or matured for a default to authorize set-off of the depositor's obligation against the defaulted payment. (c) A bank may not exercise its right of set-off under this section against an account unless the account is due the depositor in the same capacity as the defaulted credit obligation. A trust account for which a depositor is trustee, including a trustee under a certificate of trust delivered under Section 34.306(b), is not subject to the right of set-off under this section unless the trust relationship is solely evidenced by the account card as provided by Subchapter B, Chapter 111, and Chapters 112 and 113, Estates Code. (d) This section does not limit the exercise of another right of set-off, including a right under contract or common law. Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997. Amended by: Acts 2015, 84th Leg., R.S., Ch. 1236 (S.B. 1296), Sec. 20.009, eff. September 1, 2015.