N.Y. Banking Law § 680-j

§ 680-j. Recoupment or set off. 1. Except as provided in subdivision\ntwo or three of this section, a bank shall not exercise a right of\nrecoupment or set off against a special deposit.\n 2. An account agreement may authorize the bank to debit the special\ndeposit:\n (a) when the bank becomes obligated to pay a beneficiary, in an amount\nthat does not exceed the amount necessary to discharge the obligation;\n (b) for a fee assessed by the bank that relates to an overdraft in the\nspecial deposit account;\n (c) for costs incurred by the bank that relate directly to the special\ndeposit; or\n (d) to reverse an earlier credit posted by the bank to the balance of\nthe special deposit account, if the reversal occurs under an event or\ncircumstance warranted under other law of this state governing mistake\nand restitution.\n 3. The bank holding a special deposit may exercise a right of\nrecoupment or set off against an obligation to pay a beneficiary, even\nif the bank funds payment from the special deposit.\n