We are not aware of any federal or Illinois notice requirements when exercising a right of setoff, but we recommend reviewing your account agreements for any contractual notice requirements. However, if your account agreements are silent as to whether notice is required when exercising your right of setoff, your bank still may wish to consider providing some form of notice to the borrower to ensure they are aware of the default prior to receiving their next deposit account statement to avoid any confusion as to why their deposit account balance has decreased.
If we exercise our right of setoff under the terms of a loan agreement and debit the funds from the borrower’s deposit account to pay a delinquent payment, are we required to provide written notice to the borrower each time a payment is debited?
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