N.Y. Banking Law § 680-j: Recoupment or set off

§ 680-j. Recoupment or set off. 1. Except as provided in subdivision

two or three of this section, a bank shall not exercise a right of

recoupment or set off against a special deposit.

2. An account agreement may authorize the bank to debit the special

deposit:

(a) when the bank becomes obligated to pay a beneficiary, in an amount

that does not exceed the amount necessary to discharge the obligation;

(b) for a fee assessed by the bank that relates to an overdraft in the

special deposit account;

(c) for costs incurred by the bank that relate directly to the special

deposit; or

(d) to reverse an earlier credit posted by the bank to the balance of

the special deposit account, if the reversal occurs under an event or

circumstance warranted under other law of this state governing mistake

and restitution.

3. The bank holding a special deposit may exercise a right of

recoupment or set off against an obligation to pay a beneficiary, even

if the bank funds payment from the special deposit.