We have a customer who's personal account is overdrawn and has not responded to repeated requests to bring in the money. This individual also has a business account with us. Because the business account was not opened according to policy, we have no information on the business account other than the name (a "cleaning" company), address (same as individual), and EIN. The business is not organized as a corporation or d/b/a. I am wary of enforcing right of set-off (which our deposit agreement allows); however, would there be any prohibition on placing a hold on the business' funds in the amount of the O/D as long as we notified the customer? Thanks for any insight!

If you don't have the right to set-off on this account (which it sounds like you're not sure if you do or not because of how the account is set up) then you would not have the right to place a hold on the account.

Not to skirt the issue, but this sounds like a question for your bank's attorney.

I agree with Dan. If you can't take it, you can't hold it.

So you have to ask yourself some questions. If you took it and found out you shouldn't have, how long would it take you to put it back? How long would it take counsel to opine to you, your rights in this case? What items wouldn't pay because you took these funds and how much is there, is it there consistently and are you able to ask counsel first and debit the account later. Recognize that you will likely get one chance to debit this money.

Thank you both for the advice. We will contact our attorney. One quick related question. Am I right in my assumption that if the business account was organized as a sole proprietorship that we would then be able to enforce right of set-off on the personal account overdraft? Thanks again!

If the sole prop and the individual are the same entity, I think you could. Verify though, when you call counsel.