is this really legal????

I suspect you are really asking two questions here:

1. Can they really take money out of my account??
2. What can I do about this??!?

Let me stick to your first question. I bet other users will follow-up with advice on how to put a stop to this crap.

Answer: Yes, it is perfectly legal for a collection agency to draw funds (in nearly any amount!) from your private chequing account. Here's why...

The Canada Student Loans Act specifies that student loans are "collectable in full" after default. This collectable-in-full clause is echoed in the fine print of every loan certificate you sign. After you default, the bank can claim that you owe them the full amount of the debt, not just monthly payments. (Or the government, if they have taken over the loan... Or a collection agency, if they have taken of the loan...)

Also in the fine print of your student loan certificates is an agreement to allow the bank (or government, or collection agency) to take back money from any account that student loan money had been deposited money into. When you get student loans, they won't give you cash. Instead, they agree to deposit a sum of money into your private account, and in return (whether you know it or not), you agree to allow them to take money out of private account.

And if you get several loans over several years, deposited into different accounts, then the banks can take your money from any combination of those bank accounts.

Okay, I'll toss in one piece of advice, because it follows from my explanation. Here goes: If you hold a bank account that has EVER received any amount of student loan funds, then close that account. Don't you dare keep using bank accounts that have accepted student loan money, because the banks, the government, and collection agencies can, anytime, forever and ever, take your money out of your account.

FYI... Back in '98, CIBC took every penny out of my TD chequing account, without any notice to me. My cheques bounced, I was evicted, and my car seized by the bailiff. I was a full-time student at the time, but I couldn't pay my tuition, so I left school and lived homeless for while.

And if you ask the CIBC about this, they'll tell you that it's all my fault. Honestly, I wish I had closed my chequing account the day after my student loans went through!! But I had no idea that the banks could (or would!) take all of a person's money, and then refuse to fix their mistake.

Live 'n learn, eh?
--Sean

I have news for you regarding the agency's ability to withdraw funds from your account. .. The answewr is NO. The CIBC doesn't want to take the heat for any backdrafts that they cause, so they pass the buck to the agency. The CIBC will do anything within its power to avoid talking with you. They always refer you to their assigned agency to have them do the research and inquiry.

Only the CIBC has the ability to dip into your account and take funds. They are simply passing the buck to the agency well knowing that they actually did it. It is a tradition that CIBC has instituted since the beginning of the default era.

Unfortunately, if you have a CIBC student loan that is in default, they will draw funds from your CIBC bank account (if you have one with any balance in it). They cannot touch other accounts.

This is something that has affected over 100,000 Canadians during the CIBC's reign on the student loans program. Do they have the right to empty your account? Unfortunately, yes, they can under provisions of the loan agreement pertaining to the bank cure program and CIBC student loans initiative. The Federal portion, howeve,r they cannot attach because it is guaranteed by " Uncle Charlie".. the Canada Student Loans Program.

The "off-setting" of bank accounts began in the mid 1990's. There ar eways to have the transactions reversed but you have to approach them as soon as it happens. If it has imposed undue hardship that holds merit, they will give it back... especially if it is a rent matter, or a emergency issue.

It can be reversed. It is difficult, but can be done.

Hi Emma,

One thing bothered me about your post:

I tried to close the account but they said I couldn't because It was were my student loan was.

Folks...can the bank do that? Does that mean that anyone who has a student loan has to maintain their account with the lending institution for the better part of two decades? I know the banks want to keep customers but that sounds a little fishy.

I closed my account where my student loan is through.  No problems or questions asked.

Emma,

Don't knock yourself for not knowing all the details. The powers that be intentionally created a system where they don't provide you with all the information and when you do ask out pops the concept of plausible deniability. The banks and the CAs have perfected the game of hot potato.

Troy, You are absolutely right about the account with an overdraft attached to it with a balance outstanding...mine was exactly this and it remained open (inactive) for over 2 years until we could pay the overdraft.  Finally, it went to collections and was paid.  Unfortuneatley, the credit report doesn't show that we paid it off. Just shows something about a write off to collections.

Any time a debt is attached to the account the bank can hold the account open until the debt is satisfied..... fee's included

troy