Consumer Banking and Payments Law: 10.2.1.1 Types of Setoff
A bank’s right to set off its customer’s funds arises by operation of the common law, by contract, or by a specific state or federal statute.2 The requisites for the bank’s common law right of setoff are: (1) mutuality of obligation between the bank and its customer;3 (2) the funds against which a setoff is exercised belong to the customer; (3) the money to be set off has been deposited into a general—as opposed to a special, reserve, or trust—account; and (4) the debt owed by the customer to the bank i