Conclusion: A Financial Institution's Right of Setoff

We feel that the best mental image for you to carry with you concerning your right of setoff follows the organization of this section. Think first about your legal right of setoff—the prerequisites of setoff, the restrictions on setoff, priority between your right of setoff and the claims of third parties, the advisability of giving notice when you set off, and the consequences of wrongfully setting off. Then superimpose on those thoughts the extent to which contractual provisions in your account agreement can expand your right of setoff. When everything is put together, you should have a fairly complete understanding of what setoff is and when it can and cannot be used.

As we said at the beginning of this section, this area of law varies greatly from state to state. Because of this, and because of the severe consequences that can result from wrongfully setting off, we urge you to consult with your legal counsel before actually setting off in any situation. What we have tried to give you in this section is a general overview of the law of setoff, and we do not intend that you use this information to make a determination whether or not to set off in specific circumstances.