Legal Question in Banking Law in California

I'm assuming your auto loan and bank account are both with Chase. If so, what they did was perfectly legal, and if you read the fine print on your account papers you will see it is mentioned that if you fail to pay loans when due, your deposit accounts can be debited for the money owed. The reason for this is that the money you have in the bank and the money you owe them is all just one pot of money. That it is reported in separate accounts is an accounting fiction for your convenience and the banks. But at the end of the day the bank just owes you the amount you have deposited and you owe the bank the amount you have borrowed, leaving one single balance (which unless you are quite rich is going to be a balance in favor of you owing the bank). If you don't swap some of what the bank owes you on the books, for what you owe the bank on the books, according to your agreement, the bank is free to make that swap itself, decreasing what it owes you and decreasing what you owe by the same amount. It is just an accounting entry that ultimately changes nothing about the total difference between what the bank owes you and you owe it. Only when you make a deposit or the bank loans you more, does the ultimate balance change. So by contract and banking regulation, those internal accounting entries are perfectly legal.