This release applies to all credit unions, state and federal. Federal credit unions should also consult NCUA Interpretive Ruling & Policy Statement IRPS No. 82-5 (December 16, 1982) on this issue. This release addresses setoff of member accounts against Wisconsin Consumer Act debts.
Please note that the checklist does not address setoff in the context of credit card obligations, or members who have filed for bankruptcy.
Regulation Z prohibits traditional setoff against credit card obligations. Reg. Z § 226.12(d) and the corresponding Commentary discuss the prohibition and the seldom used exceptions.
In bankruptcy, the automatic stay bars actions to collect a debt from the bankruptcy petitioner. To the extent that setoff may ultimately be permitted, it requires assistance from the credit union’s attorney in petitioning the court to lift the automatic stay.