Automation brings convenience, but when it comes to your money it can also bring a lot of problems—especially when you forget about a recurring debit. You’ve managed to get through the month by walking a tightrope between your income and your expenses, only to have a wave of overdraft fees impact your checking account because you forgot about one recurring bill. And if that recurring debit goes toward paying off a payday loan or something similar, you can get trapped in a cycle of debt.
That can make you feel powerless, but you actually do have power in this situation, because you always have the option of stopping automatic payments—yes, even those going to a payday loan company. All you need to do is revoke your Automated Clearing House (ACH) authorization.
How to revoke an ACH authorization
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The Automated Clearing House (ACH) is how most banks and other financial institutions handle electronic funds transfers (EFT). Administered by the National Automated Clearing House Association (NACHA), this system is what makes all those payments and deposits hit on time and without any significant delay.
When a bank or company wants to access your account to make deposits or charge debits against it using the ACH, you actually have to give them permission. In many cases, this permission is buried in the agreement you’re signing—those pages and pages of legalese you have to scroll through before clicking “I AGREE.” So if you take out a payday loan or sign up for any sort of recurring service that debits your bank accounts directly (as opposed to a credit card), you’ve given that company permission to use ACH to do so. But you have rights when it comes to your bank accounts, and you can revoke that permission whenever you want.
This is a two-step process:
Contact the company. Whether it’s a payday lender or some other entity, step one is to contact them in writing. The Consumer Financial Protection Bureau (CFPB) has sample letters you can use, but this doesn’t need to be complicated: Just provide the details of your account with the company and clearly state you are revoking their access to your bank account.
Contact your bank. You’ll also need to write your bank with a similar letter, providing the details of the company that’s been debiting you and your account with the bank. The CFPB has sample letters for this as well.
It’s a good idea to follow up with a phone call or other contact method, but putting it in writing is essential so you have a record of the request. You need to revoke access at least three days before the next payment hits your account in order to avoid it, but sooner is always better. The more time you give both the bank and the debiting company to go through the revocation process, the better your chances of avoiding that next hit.
After revoking access, monitor your account closely. If you revoke access with time to spare and the debit still hits your account, you can ask your bank to stop payment, just like a check. You can also try to get an ACH payment reversed if it occurred after you revoked authorization—this is why having a record of your request is important. Banks and credit unions will have their own forms or processes for this, so you’ll need to check their website or make some phone calls to get this done.
Revoking ACH access doesn’t change your obligation to pay off your debt or pay for a service. Blocking a payday lender from automatically debiting your account can give you the breathing room to get your finances under control, but you still owe them the debt and interest as outlined in your agreement with them. You’ll need to arrange for an alternative way to pay so you can avoid any other negative consequences, like legal action or cancellation of services.
Also, keep in mind that ACH authorization can be turned back on if you sign any new forms or paperwork with the lender or company, so keep an eye out for that.