Under Illinois law, the right of setoff can arise contractually (when the deposit account agreement provides for a right of set-off) or under the common law when there is “mutuality” of parties (the deposit account is owned by the same party that owes the debt to the bank). We recommend checking your deposit account agreement to see if you are authorized to set off the account for a deficient loan. Even if your deposit account agreement is silent on this issue, however, we believe you can exercise your common law right of setoff if the customer is the sole owner on the account, and the debt has matured.

For resources related to our guidance, please see:

• Pope v. First of Am., N.A., 699 N.E.2d 178, 180 (3rd Dist. 1998) (This court held that a bank could exercise its contractual right of setoff for customer’s unauthorized withdrawals from another customer’s bank account.)

• Selby v. DuQuoin State Bank, 223 Ill.App.3d 105, 107 (5th Dist. 1991) (The common law right of setoff requires a mutuality of parties, meaning that the deposit account is owned by the same party that owes the debt, as well as a matured debt.)