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07

Mar 2011

Before bankruptcy: Stopping automatic withdrawals.

Posted by / in Before Bankruptcy / 2 comments

<h2>Before bankruptcy: Stopping automatic withdrawals</h2>

 

While trying to avoid bankruptcy, people sometimes authorize debt collectors to take monthly withdrawals from their bank accounts.   (Or authorize withdrawals by these “debt settlement” scams.  Or credit card companies or bank loans.)

When people face the fact that bankruptcy is the better way to go, they struggle with turning off those automatic withdrawals.

A bank with good customer service should be happy to help, if you explain the problem to them.   So I’m constantly surprised at how often my bankruptcy clients report they won’t won’t help–and act like it’s not their problem.

The law–the Electronic Transfer of Funds Act–places the responsibility squarely on the bank.

Here are the steps the law says you have to take:

First, tell the debt collector (or debt negotiation scam or creditor) that they are no longer authorized to take money out of your account.  (Keep notes.)

Second, tell your bank.  You can do it orally or in writing.  I like taking a letter into the branch.  Show them where on your statement the money came out last month–and say that’s no longer authorized.   You need to talk to the bank at least three days before the next payment is scheduled to come out.

If the money comes out anyway, tell the bank to put it back.  Orally or in writing; obviously writing is smarter.  They have ten days (ten working days–two weeks).

If the money doesn’t come back, you can sue.  You get the money back, plus money to pay your lawyer, plus a penalty of up to $1000 thrown in.  Not bad.

The problem comes up if you agreed to such big payments, you can’t make the car payment if it takes the bank two weeks to get the money back.

In that case, you need to close the account.

Just last week I had a couple see me about bankruptcy.  They had an automatic withdrawal set up an a loan (not a credit card) owed to a Capital One Bank.   They called Capital One and said those withdrawals are no longer authorized.  “Can’t stop this month,” they were told.  “We need 15 days’ notice.”

(Fifteen days notice!  The law says a transfer is “unauthorized” if they don’t have your actual permission.  And taking money from your bank account, unauthorized–well, folks used to call that stealing.)

bank check

Back when I went to law school, your bank wouldn’t let someone take money out of your account, unless they had a signed check.

They then called their own bank–the law says you need to give three days notice to your bank.  The bank said, sorry.  We can put a stop payment, but when Cap One tries a second time, it will go through.

What now?  I told them, go back and close your account.  When they went down there–miracle of miracles.  Now they are told, don’t need to close your account.  We can stop that money from coming out, no problem.  And they did.

What’s the lesson?  The whole idea of banking is this.  Your bank pays people you want paid–and does NOT let other people take your money.  (Not without a court order, anyway.)   The law doesn’t allow your bank to give your money away.  And you shouldn’t allow it either.

This is one area where the law is clearly on your side.

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Robert Weed has helped twelve thousand people file bankruptcy in Northern Virginia. Robert Weed is a frequent panelist and speaker at the meetings of the National Association of Consumer Bankruptcy Attorneys. He is one of Northern Virginia’s most experienced personal bankruptcy lawyers. As an expert on changing consumer bankruptcy laws, Robert Weed has been interviewed on local and national TV and quoted in newspapers across the country.

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2 comments
  • alexis kaiser

    October 12, 2011, am31 12:20 AM
    01

    What if you never authorized automatic withdrawals and the credit card company just took the money out of your checking account because you were six months past due on your credit card bill (same bank issued the credit card – Wells Fargo). Thanks

    • Robert Weed

      October 12, 2011, am31 6:23 AM
      02

      A bank (credit unions have more rights) can take money out of your account for a loan, or a business credit card, but not a personal credit card. They may have some way around it, but what you say does not look legal to me. I think your best legal rights, under the electronic transfer act, run again Wells Fargo the Bank, not Wells Fargo the Credit Card. Go to your bank, tell them, and give them a letter: This withdrawal was not authorized, get that money back. Unless the money was taken according to law, or by court order (and you say there isn’t one) then you can sue. There are not many lawyers out there who are familiar with the electronic funds transfer act–you’ll need one if they don’t give the money back. If you have a valid claim under the electronic funds transfer act, Wells Fargo, the Bank, would have to pay your lawyer, as well as give the money back to you.

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