I co-signed a personal loan for my daughter. The bank withdrew the money from my father’s account instead. How could this happen?

Dear Quentin,

My daughter took out a bank personal loan three years ago and I had to co-sign the loan due to her age and lack of credit. The bank handled the loan documentation as per normal protocol, and before finalizing asked my daughter if she wanted automatic deduction monthly from her checking account which shaved off a half of a percentage point on the rate, so she agreed.

As a side note, I use a different bank, but I am on my elderly father’s checking account as he is in frail health and has been in and out of the hospital more times than I can count over the last several years.

‘I do agree this should have been caught sooner, but I have no access to my daughter’s account and she saw payments being made on the loan every month.’

Fast forward to approximately six months ago. My father and I were reviewing his monthly expenses, we saw a deduction made for X amount and it was listed as loan payment. He has no outstanding loans so it took us quite a while to figure out what had been being taken out each month (phone calls to the bank took weeks to get an answer). 

It turns out that my daughter’s loan has been paid with my father’s checking account, not my daughter’s checking account. I then asked my daughter if she had been paying the loan. We checked her checking account, but no deductions were being made from that.

The bank told us that we should have seen this sooner. They said all they could do is deduct the amount that has been paid from my father’s account from my daughter’s account. I do agree this should have been caught sooner, but I have no access to my daughter’s account and she saw payments being made on the loan every month, so she didn’t question that. 

My issue, and of course my father’s issue is the bank erred in putting his account number as the checking account from which the loan was to be paid from instead of my daughter’s account. Isn’t there some responsibility from the bank to also assist in making things right?

Stressed Father

Dear Stressed,

I have questions, and you don’t need to be Inspector Poirot to answer them. 

How did your father’s bank-account number appear on the loan application? Who filled it out and who, aside from your good self, had that account? That seems like a good place to start. Did you fill out the form and mix up the two accounts? Are you a co-signer on your father’s account or listed as a co-owner? If you are a co-owner, and you wrote the wrong account number, the responsibility lies with you as a co-signer on the loan. Did your daughter put down your father’s account instead of her own? If so, how did she have your father’s bank account number?

Are you a co-signer on your father’s account or co-owner? If you are a co-owner, and you added the wrong account number, the responsibility lies with you.

If your father’s bank-account number was not given on the original paperwork, the bank made the mistake. If that’s the case, given that your father is not a third party in this loan, the bank should absolutely make his account whole again. If a bank deposits money into the wrong account — $1 million windfall — and the person spends the money, the bank can come after that person for the money. It was not their money to spend. The opposite is also true. The money from your father’s bank account was not the bank’s to take.

Your daughter said she saw that the loan was being repaid but she never noticed that no money was being withdrawn from her own checking account over a three year period? If that’s the case, she must be cash rich and would, in theory, have no problem paying your father back the money that was withdrawn from his account over the last three years. Or did she notice that the loan was being repaid, did not see the withdrawals, and her account was looking mighty healthy under the circumstances, and chose either not to notice or not to act?

Somebody here dropped the ball: Your bank, your daughter or your good self. 

Also read: I want to take a life-insurance policy out on my husband. He says ‘hell will freeze over’ before he’s worth more dead than alive

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