Common use of Setoff and Security Interest Clause in Contracts

Setoff and Security Interest. If you ever owe the Credit Union money as a borrower, guarantor or otherwise, and it becomes due, the Credit Union has the right under the law (called “setoff’) and under this agreement (by which you grant the Credit Union a security interest in your deposit account) to use the money from your account to pay the debt. The Credit Union may use the money to pay the debt even if withdrawal results in a dividend penalty or dishonor of checks. In the case of a partnership or joint account, each partner or joint owner agrees that the Credit Union may use the money in the account to satisfy any one of their individual obligations. Similarly, each partner or joint owner agrees that the Credit Union may use the money in their individual accounts to satisfy obligations in the joint account or partnership account. The security interest granted by this Agreement is consensual and is in addition to the Credit Union’s right of setoff. However, the right of setoff and security interest may not apply to your account if: (a)it is an IRA or a tax-deferred Xxxxx Retirement Account; (b) the debt is created by a consumer credit transaction under a credit card plan; or (c) the debtor’s right of withdrawal arises only in a representative capacity.

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