You have protections when it comes to automatic debit payments from your account | Consumer Financial Protection Bureau


People use automatic payments set up with a merchant or other service provider to pay bills and other recurring payments from their trust or credit union accounts. This could be for utility bills, citation card bills, monthly fees for childcare, gymnasium fees, car payments, or even a mortgage. such automatic pistol payments can be a convenient way for people to make sure they pay their bills on meter. Some lenders offer an interest rate reduction on loans for paying by automatic debit. however, consumers have told us that in certain cases, they have had trouble stopping automatic payments after providing a company with their bank account number .
therefore, before you give anyone your bank report number and license to automatically withdraw money from your bank score on a regular footing, it ’ mho good to know how automatic pistol debits work, what to be careful about, and how to stop the automatic payments if you cancel the serve or merely change your mind about how you want to pay .

How do automatic debit payments work?

You have choices about how to pay your bills. Some of your choices are to pay by check or to pay electronically. Most banks provide online or mobile bill payment services that let you schedule and send payments through your bank, either on a erstwhile or recurring basis. Another electronic payment option is to give permission directly to a company, such as a merchant or lender, to take payments from your bank account on a recurring footing. We ’ ll call these automatic rifle debit payments. Let ’ s take a closer expect at this last kind of electronic payments.

To set up automatic debits immediately with a company, such as a student loan or mortgage servicer or even a gymnasium, you give the company your checking bill or debit batting order data and give them permission ( “ authority ” ), in promote, to :

  • electronically withdraw money from your account;
  • on a recurring basis, usually at regular intervals like every month.

You can set up automatic debit payments to pay the same measure each time, or you can allow payments that vary in sum within a stipulate range – for model, for your utility bill that changes each calendar month. The company should let you know at least 10 days before a schedule payment if the requital will be different from the authorized amount or range, or the come of the most recent requital .

How are automatic debit payments different from bill-pay?

automatic debit payments work differently than the recurring bill-pay feature offered by your bank. For recurring bill-pay, you give license to your bank to send payments to the party. With automatic pistol debits, you give your permission to the caller to take the payments from your deposit bill .

Be cautious about giving anyone your bank account information and authorization

automatic payments can help you stay on cut with bills and other regular payments. however, be careful about giving a company license to take payments immediately from your account .
Before you give a party license to make automatic withdrawals :

  • Verify the company. Before agreeing to let a company automatically take money out of your bank account, make sure the company is legitimate and credible. Consider using a different payment method until you’re sure you’re happy with the company or service. Never give your bank account or debit card information to a company that you’re at all unsure about.
  • Know your rights. A company cannot require you to repay a loan by automatic debit from your checking account as a condition for giving you a loan (unless the loan is an overdraft line of credit). Be wary of a company that pressures you to repay by automatic debit.
  • Be careful about overdraft and insufficient funds (NSF) fees. Automatic payments can help you avoid late fees on your bills. But if you forget to track your account balance and it’s too low when an automatic (or other) payment is due, you might have to pay overdraft or NSF fees. Both the bank and the company might charge you a fee if there is not enough in your account. These fees can add up quickly. Pay close attention to your bank account balance and upcoming automatic payments to make sure there will be enough money in your account when the payment is scheduled.
  • Review the terms of your agreement for the automatic payment. The company must give you a copy of the terms of your payment authorization. The payment authorization is your agreement to allow the company to debit your bank account for payment. The terms of your authorization must be laid out in a clear and understandable way. It’s important to review the copy of your authorization and keep a copy for your records. Make sure you understand how much and how often money will be taken out of your account. Monitor your account to make sure the amount and timing of the transfers are what you agreed to.

You have protections – including the right to stop automatic payments

federal law provides certain protections for recurring automatic rifle payments. You have the correct to stop a company from taking automatic rifle payments from your bank account, even if you previously allowed the payments. For case, you may decide to cancel your membership or service with the company, or you might decide to pay a different way .
If you decide you want to stop automatic debit payments from your account :

  1. Call and write the company. Tell the company that you are taking away your permission for the company to take automatic payments out of your bank account. This is called “revoking authorization.” Click here for a sample letter .
  2. Call and write your bank or credit union. Tell your bank that you have “revoked authorization” for the company to take automatic payments from your account. Click hera for a sample distribution letter. Some banks and credit unions may offer you an online form.
  3. Even if you have not revoked your authorization with the company, you can stop an automatic payment from being charged to your account by giving your bank a “stop payment order.” This instructs your bank to stop allowing the company to take payments from your account. Click here for a sample “stop payment order.”
    1. To stop the next scheduled payment, give your bank the stop payment order at least three business days before the payment is scheduled. You can give the order in person, over the phone or in writing.
    2. To stop future payments, you might have to send your bank the stop payment order in writing. If your bank asks for a written order, make sure to provide it within 14 days of your oral notification.
    3. Be prepared to include a copy of your revocation to the company (see step 1) with your written stop-payment order.
  • Monitor your accounts. Tell your bank right away if you see a payment that you did not allow (authorize), or a payment that was made after you revoked authorization. Federal law gives you the right to dispute and get your money back for any unauthorized transfers from your account as long as you tell your bank in time. Click here for a sample letter.

Be aware that banks normally charge a fee for a stop requital order. Further, cancelling your automatic requital does not cancel your contract with the company. If you want to cancel a contract for a service, like cable or a gymnasium, be sure to cancel your sign with the company adenine well as telling it to stop automatic payments. If you cancel an automatic payment on a lend, you however have to make payments on that loanword.

We want to know about your experiences, good or bad, with using and with cancelling automatic pistol payments – leave a remark on the web log below .
If you ’ re having a problem with a deposit bill or service, submit a complaint to the CFPB at consumerfinance.gov/complaint or call ( 855 ) 411-2372 .
Have questions about consumer fiscal products and services ? Find answers at consumerfinance.gov/askcfpb .

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