October 4, 2010
Many of us have at least part of our financial lives on autopilot. Maybe Netflix and your gym automatically bill your credit card each month. Or perhaps you’ve authorized your credit cards and cable company to pull money directly from your checking account.
It all runs like a well-oiled machine, until you’ve canceled your gym membership or another service — and the biller won’t stop deducting money, long after you’ve asked it to stop.
What sort of rights do you have? James B. Rule, a sociology professor at the Center for the Study of Law and Society at the University of California, Berkeley, recently explored the issue in this article after his bank branch told him it could not cancel a regularly scheduled deduction from his checking account. Though his issue was ultimately resolved, he said he couldn’t help wondering: What would happen if the company refused to stop pulling money from his account? Can your bank really refuse to cut off a rogue biller?
I decided to pose that question to several other large banks, as well as look up the Fed’s rules governing preauthorized transfers, part of Regulation E. The rules, as Professor Rule also pointed out, are pretty clear:
Once a financial institution has been notified that the customer’s authorization is no longer valid, it must block all future payments for the particular debit transmitted by the designated payee-originator. So a bank can indeed block payments to a biller who continues to siphon money from your checking account or debit card.
The Fed rules go on to say that a bank can’t wait for the biller to terminate the automatic debits, though it can ask the consumer to confirm the change in writing — within 14 days of notifying the bank verbally.
You can always contest a debit after the fact, too. You have 60 days to notify the bank from the time you receive a statement containing the error. The bank has 10 days to give you a credit, though it has a total of 45 days to resolve the issue.
Credit card transactions work a little differently since the money isn’t being pulled directly from your account. You have 60 days from the time you received the bill with the erroneous charge to notify your credit card company, in writing, of the problem. The card issuer then has 30 days to acknowledge that it received your note, and must try to remedy the situation with the biller within two billing cycles of receiving the note (but no longer than 90 days), according to the regulations.
In the meantime, you are not required to pay the disputed amount, or any related fees or finance charges. And if your credit card bills are automatically deducted from your checking account, the card issuer can’t deduct the disputed amount as long as it received the error notice “any time up to three business days before the scheduled payment date,” according to the regulations.
In all cases, the banks said that the consumer must first contact the merchant or service provider, which makes sense. (Always remember to keep a paper trail once you start the process, and get the names of all customer service representatives you spoke with, and keep records of the date and time you spoke with them.)
And make clear to the bank that the recurring charge is “unauthorized.” For instance, Wells Fargo said there is no charge to block unauthorized checking and debit card charges. But if a customer simply asked the bank to stop a payment, a fee would apply.
Many of us have at least part of our financial lives on autopilot. Maybe Netflix and your gym automatically bill your credit card each month. Or perhaps you’ve authorized your credit cards and cable company to pull money directly from your checking account.
It all runs like a well-oiled machine, until you’ve canceled your gym membership or another service — and the biller won’t stop deducting money, long after you’ve asked it to stop.
What sort of rights do you have? James B. Rule, a sociology professor at the Center for the Study of Law and Society at the University of California, Berkeley, recently explored the issue in this article after his bank branch told him it could not cancel a regularly scheduled deduction from his checking account. Though his issue was ultimately resolved, he said he couldn’t help wondering: What would happen if the company refused to stop pulling money from his account? Can your bank really refuse to cut off a rogue biller?
I decided to pose that question to several other large banks, as well as look up the Fed’s rules governing preauthorized transfers, part of Regulation E. The rules, as Professor Rule also pointed out, are pretty clear:
Once a financial institution has been notified that the customer’s authorization is no longer valid, it must block all future payments for the particular debit transmitted by the designated payee-originator. So a bank can indeed block payments to a biller who continues to siphon money from your checking account or debit card.
The Fed rules go on to say that a bank can’t wait for the biller to terminate the automatic debits, though it can ask the consumer to confirm the change in writing — within 14 days of notifying the bank verbally.
You can always contest a debit after the fact, too. You have 60 days to notify the bank from the time you receive a statement containing the error. The bank has 10 days to give you a credit, though it has a total of 45 days to resolve the issue.
Credit card transactions work a little differently since the money isn’t being pulled directly from your account. You have 60 days from the time you received the bill with the erroneous charge to notify your credit card company, in writing, of the problem. The card issuer then has 30 days to acknowledge that it received your note, and must try to remedy the situation with the biller within two billing cycles of receiving the note (but no longer than 90 days), according to the regulations.
In the meantime, you are not required to pay the disputed amount, or any related fees or finance charges. And if your credit card bills are automatically deducted from your checking account, the card issuer can’t deduct the disputed amount as long as it received the error notice “any time up to three business days before the scheduled payment date,” according to the regulations.
In all cases, the banks said that the consumer must first contact the merchant or service provider, which makes sense. (Always remember to keep a paper trail once you start the process, and get the names of all customer service representatives you spoke with, and keep records of the date and time you spoke with them.)
And make clear to the bank that the recurring charge is “unauthorized.” For instance, Wells Fargo said there is no charge to block unauthorized checking and debit card charges. But if a customer simply asked the bank to stop a payment, a fee would apply.
Closed November 2010
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