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Payday loans

How can I stop a payday lender from electronically taking money out of my bank or credit union account?

There are three things to consider when faced with this problem. First, do you think the transfer from your account is unauthorized (that is, you did not give permission or the lender is going beyond what you initially gave permission for)? Second, do you want to stop one or more payments out of a series you actually did authorize? Third, do you want to completely revoke (cancel) your authorization?

Unauthorized transfers

If you think that your payday lender is withdrawing more money from your checking account than you authorized, you should tell your bank or credit union that you are having trouble with “unauthorized transfers.” If anyone takes money out of your account without authorization, federal law requires the bank or credit union to take steps to stop that problem after you give them proper notice.

Stopping a series of transfers

You have some additional protections if your loan agreement calls for you to make regular electronic payments at repeated intervals, such as loans that are repaid through installments, and payday loans that are automatically set up to renew a certain number of times. You can stop one of a series of regularly scheduled payments by giving your bank or credit union oral or written notice at least three business days before the transfer is scheduled. The bank or credit union may require written confirmation of oral notice. They may charge fees for a stop payment.

Cancelling authorization

Under rules that all banks, credit unions and lenders agree will govern electronic transfers, you can also revoke any authorization that you gave a payday lender to take money out of your account. You should follow the instructions in the initial authorization that describe how to tell the payday lender to stop. If there are no instructions on how to tell the lender to stop, then the authorization may be completely invalid – but you should still tell the lender to stop taking money from your account. Specifically, you should say: “my authorization to debit my account is revoked." You must send these instructions to your lender in writing. You should also keep a copy to take to your bank or credit union. Then tell your bank or credit union that any further transfers are “unauthorized” and you want them treated that way – either stopped or immediately refunded. If your bank or credit union does not follow your instructions, you should contact CFPB.

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