I was asked to sign an “ACH authorization” to allow electronic access to my account in order to repay a payday loan. What is that?
An Automated Clearing House (ACH) authorization is a payment authorization that gives the lender permission to electronically take money from your bank, credit union, or prepaid card account when your payment is due. You can revoke this authorization.
What you should know
- Consumers usually are asked to provide the payment authorization as part of the process of getting the loan. The authorization will be in your loan document and it may have a place for you to initial as approved. If you approve, the lender will take your payments directly from your account without any further action by you. You may choose to refuse the authorization.
- There are a variety of payment options for payday lenders to obtain repayment. Some lenders frequently obtain multiple types of authorizations, such as taking a post-dated check along with the consumer’s debit card information.
- Under federal law lenders cannot condition a payday loan on obtaining an authorization from the consumer for ‘‘preauthorized’’ (recurring) electronic fund transfers.
Before you agree or sign
- Read your loan documents carefully before signing them.
- Make sure that the “ACH authorization” states clearly how it can be stopped or revoked. You should not sign an ACH authorization that does not say clearly how you can stop or revoke it. If you have signed an authorization that does not contain instructions on how to revoke it, you could still revoke the authorization by contacting the lender, bank or credit union, or both.
- Know exactly how much will be deducted from your account and when. Make sure you understand:
- How much would be withdrawn from your account
- Whether it's the full amount you borrowed, or a renewal or rollover fee that does not pay off the full amount borrowed and your loan is renewed automatically
- When the withdrawal would occur
If you have problems with a payment authorization, such as the ACH was unauthorized or revoked, you may want to contact your state regulator or . You can also submit a complaint to the CFPB online or by calling (855) 411-2372.
Tip: Be sure that you can afford to repay the loan. If you don't have enough money in your account when the lender attempts a withdrawal, your loan will be delinquent. This might result in the lender charging you a late fee, and your bank or credit union charging you a “bounced check” or non-sufficient funds (NSF) fee.