Yes, you can stop automatic withdrawals from your account. While this process is in place to benefit both lenders and borrowers alike, you should stop payments if you suspect you are being scammed or perhaps cannot afford to repay your loan and need money today for more urgent and pressing expenses such as food or rent.
Key Points:
- By writing to your lender and your bank, you will be able to stop automatic withdrawals.
- American payday lenders use the ACH Authorization program to collect automatic repayments from borrowers’ bank accounts. It is designed to be convenient and avoid you having to make manual repayments.
- Automatic withdrawals are used to ensure that payments are made on time. Most lenders will alert you that they are withdrawing so as not to surprise you.
- Over 12 million Americans use payday loans every year, with the US boasting over 23,000 lenders.
If you suspect your lender is withdrawing money too often, excessively, or when you’ve already paid off your debt, contact your bank.
Why Do Lenders Take Automatic Payments?
This system is beneficial for lenders as it means that they receive their money back when they expected it. For borrowers, it’s useful as it takes away the need to remember to make your repayments each month.
Withdrawals are made through a system called ACH Authorization which takes payments on a regular basis from your account.
Most lenders will remind you that it’s withdrawal day, so that you aren’t hit with a shock when you see money missing from your account.
This process can be likened to a direct debit and, if you’re happy with your lender having access to your money, is a time-saver.
Why Would I Stop Automatic Payments?
Most importantly, you should stop automatic withdrawals if you think your lender is taking out too much money, taking payments too frequently, or taking payments when you have already paid your debts. If this is the case, contact your bank immediately.
This should not be the case if you are using a trusted lender. In the US, there are over 23,000 regulated lenders and you should work with one of them when taking out a loan. Before entering a contract, check that your lender is regulated by checking their status on the OLA website or SEC register.
You may also want to halt payments if you have more pressing debts that you are more desperate to pay. This should only be the case if you are in an urgent situation, such as if you need to pay off a medical bill right away. If this is the case, you can stop automatic payments while you find another source of money to pay off your debts.
If you miss a repayment, you will suffer late fees and could have to pay increased interest.
Automatic withdrawals save you time, and means you don’t need to remember to make your payments on time, thus preventing late fees.
How To Stop Automatic Withdrawals
- Write to your bank or credit union. This letter you must clearly state that you want payments from your account to stop. You must also let them know your bank details.
- Write to your lender. This legally requires them to stop automatically taking money from your account. When you write this, ensure that you state this request applies to any and all future debits, unless you inform them otherwise.
- Ask your bank to ‘stop payment order on a payday loan.’ This stops upcoming withdrawals, but this request must be made 72 hours ahead of the withdrawal. You will need to send another letter, or contact your bank, to do this.
- Clear your account. If there is no money in your account, there is no money for them to take. This should be a last resort and should only be done if withdrawals are excessive, too frequent, or you question the legitimacy of your lender.
- Settle your debts. If you settle your debts, your lender (assuming they are trustworthy) will stop withdrawing.
