How to Tell Your Bank to Stop Payday Loan Automatic Withdrawals
How to Tell Your Bank to Stop Loan Automatic Withdrawals
Stop those automatic withdrawals! I usually tell people that when we first talk. Even before we file the bankruptcy.
When you try to stop them, people tell me it’s hard to get their banks to help. (Today’s New York Times said the same thing. The Times says the banks don’t cooperate because the banks love those overdraft fees.)
Banks will verify your signature on a check to match your signature card. But ACH automatic withdrawals just sail through.
Stopping those Automatic Withdrawals Shouldn’t be Hard
Think about it. Your bank has two big jobs.
1. Pay people you want to pay.
2. Don’t let anybody else take your money
The bank tries to do that on paper checks, by comparing your signature on the check with your signature card.
But when someone posts an ACH transaction on your account, as far as I can tell, nobody at the bank looks at anything. (That’s one reason these internet payday loans are so dangerous.)
Legal payday loans in Virginia are not allowed to set up automatic withdrawals. But many internet payday loan companies know they are illegal and don’t care.
You Have the Right to Stop to Automatic Withdrawals
You have the right to STOP a pre-authorized electronic transfer up to three days before the transfer is scheduled by notifying your bank. You can notify them orally or in writing–obviously writing is smarter. Keep a copy.
You should notify the payday loan people too. That’s not likely to stop the internet payday lenders. (It usually stops legitimate finance companies.) But, either way it improves your legal position against your bank.
If the Money Comes Out Anyway, The Bank Has to Put it Back
You then have to notify the bank within 60 days if they allow the money to come out anyway. (You obviously don’t want to wait 60 days.)
The bank then has ten days to investigate and one more day to put the money back. (Even if the bank can’t get the money back, they still have to reimburse you!) If they don’t, you can sue them. You can sue for the money you lost, which would include overdraft fees. (A quarter of people who take out payday loans get hit with overdraft fees when the payments come out.) Plus a penalty of $100 to $1000. Plus the bank has to pay your lawyer. (Three times the money you lost if the court says the failure was willful.)
I’ve threatened it. But I’ve never had to sue under the Electronic Funds Transfer Act.
Stopping the Automatic Withdrawals is not a “Favor”
I hope what I’ve told you helps your attitude when you tell the bank to stop a payday loan automatic withdrawal. You are not begging for a favor–even if that’s the way they treat you. You are asking them to do their main job–keeping your money safe! And you have rights under Federal Law to sue them if they don’t do it!
More Info from the Consumer Finance Protection Bureau
Here’s more information from the Consumer Finance Protection Bureau.