Payday loans are good options for some quick cash. However, there are various aspects related to the loan that users often are not aware of. One of them is that the lender takes your permission for automated transactions.
You should have read their policies before taking the loan. Anyway, if you have already taken the loan, there are still ways to stop automatic electronic debits. You can ask the company, call and write your bank, or close your account.
It’s better to know the consequences before taking the action. Otherwise, you may face higher penalties for late charges.
Understanding Automatic Payments
Automated transactions are the process where your lender takes your permission to receive a bill after a certain time. When you give this permission, your bank won’t ask for permission when the day arrives. This automated payment system offers both pros and cons.
This will help you repay the loan on time. It reduces the risk of forgetting the date and prevents late fees. However, there is a major concern related to payday loans. 80% of borrowers fail to repay the loan on the due date and suffer from drowning in payday loans.
So, your lender will keep cutting an amount from your account on each payday. You may not be comfortable with it and may want to stop this. Thankfully, there are multiple ways to do this.
Tips to Stop Automatic Payments for Payday Loans
If you are bothered by the automated payment system, you can take the following steps. Check the below discussion, and see what method feels the most convenient.
1. Call and Write the Company
The first thing you can do is inform your loan provider. You can send them emails or talk to them via phone. Explain your problems and preferences and why you don’t want them to automatically charge from your bank.
This can be effective, especially when you take it from the credit union account or a payday loan direct lender. However, 3rd party lenders may not be very willing. Yet, you should first notify your payday lender before taking other steps.
2. Call and Write Your Bank or Credit Union
Contact your bank company and ask them to stop this automated withdrawal. Send them both emails and talk to them via phone. The email will work as a written document for the bank. Revoking authorization helps prevent 3rd parties from receiving automated debits.
You should also check your state’s law as well as federal laws. In some states, automated payments may have restrictions. In that case, it will be easier for you to stop automated debits. Discuss with your bank in detail and get their confirmation about the revocation to stop the payment order.
3. Monitor Your Accounts
After the revocation, you should monitor your account. Check for each transaction and ensure no unauthorized transaction is taking place. If you notice any such transaction, contact the bank immediately and the Consumer Financial Protection Bureau (CFPB). Federal law gives you the right to dispute any unauthorized transactions. The law also gives you the right to get your money back.
4. Close Your Bank Account
First, try the above-mentioned methods and see if they work. If none of them works and you are still losing money from your account, then stopping the bank account can work. In order to do so, visit the bank with your ID and account details. Request closure, withdraw remaining funds, and return cards or checks.
You Still Need to Repay the Loan
Once you have succcessfully stopped the automated payment, don’t think you no longer owe the money. You still have to repay the borrowed money along with interests. However, now you will have more control over the finances.
After stopping automated debits, contact the lender. Let them know, and explain why you did this. It will save you from misunderstandings and disputes. Ignoring the loan can lead to late fees, collection efforts, or damage to your credit score.
Things to Consider Before Stopping ACH Debits
Before you leap forward to stopping the automated payment, it’s important to know some additional aspects. Making an informed choice will save you from future hazards. Here are the things you must consider:
1. There Can Be Late Fees
If you stop the automated transaction, the lender won’t be able to get their lent money. Failed transactions may lead to late fees, and this will add up to your penalty charges. Therefore, if you are stopping the automated payment, manually repay the loan to your lender.
2. Your Credit Score Can Be Affected
When you don’t repay the loan on time, the lenders can take action. Some lenders report unpaid debts to credit bureaus, which can lead to negative marks on your record. Even if they don’t, unpaid loans may be sent to collections. This can hurt your score even more. A lower score makes borrowing harder in the future.
3. Violation of Contract Terms
Stopping automated debits for payday loans may violate the terms of your loan agreement. Most contracts include clauses requiring timely payments. Failure to comply could lead to penalties, including late fees or the lender pursuing legal action. You must review the agreement carefully before taking any action.
Frequently Asked Questions
Can I stop automatic electronic debits for payday loans?
Yes, it’s possible to stop automatic electronic debits for payday loans. Calling the lender or the bank can help. You can also close the account if needed. However, you will still owe the money to the provider.
How long does it take to stop an automatic debit?
The actual time for stopping the automatic transaction can vary depending on your location, account type, and bank policies. Nonetheless, you should at least apply three days early before the payment is due.
Can I get a refund for unauthorized ACH debits?
Yes, it’s possible to get a refund for any unauthorized debits. Let the bank know about the transaction, and consult with a lawyer. The federal law is in your support, and will help get the money.
Conclusion
Stopping automatic electronic debits helps you regain control over your finances, avoid overdraft fees, and prevent ongoing debt cycles. However, make sure to communicate with the lender and find a manageable solution.
