Your Consumer RightsYour Rights on Electronic Payment of Cash Advance Loans
In the United States, a borrower of a cash advance has the explicit right to disallow the cash advance lender to access their banking account electronically. Of course, this does not satisfy the loan, and the lender may choose to collect another way. This allows the borrower a break from the repeated finance charges that the cash advance lender may force them to accrue.
Many lenders write their contracts with automatic renewal clauses. However, simply agreeing to such a clause within a contract does not mean that the lender can require that you pay the loan back by using electronic means. The Electronic Fund Transfer Act, or EFTA, spells out the borrower's rights specifically. The language of the EFTA can be found at 15 U.S.C. 1693a(9). Though, while this does allow the borrower to stop the lender from continuing to deduct money from their account, the borrower's bank may levy a stop-payment fee. This is standard practice, and typically averages 25 to 30 dollars.
To stop an electronic withdrawal, you should notify your bank, either in writing or verbally, at least 3 business days before the transaction. Some banks require that, within two weeks of providing oral notice, writing documentation stating the customer's wishes be filed. This allows your bank to have proof that they didn't forbid the transfer of their own volition. Should writing documentation not be provided within the allotted time, the stop-payment order will be rescinded.
Be aware, however, that simply stopping the first withdrawal is often not enough. Many cash advance lenders will resubmit their request for payment, and the bank should be notified that they should decline all requests from that creditor. Banks can do this, but you must notify them of your desire that they should do so.
To stop withdrawals from your bank account permanently from the payday lender, you should provide them, in writing, a letter stating clearly your desire that they should no longer attempt to collect electronically from your account. In order to ensure that the order is obeyed, you should also provide a copy of that letter to your financial institution.
It is possible of course, that your bank will want written documentation that you informed the lender that no further automatic drafts from your accounts are authorized. Ensure that your bank receives this in a timely fashion, within two weeks. Even if you take those steps, however, mistakes do happen, and you should watch your bank statements closely to ensure their continued compliance.
While federal law does protect the borrower in most cases, the borrower does not have the right to disallow a lender from obtaining a one-time payment from the borrower's bank. A one-time debit transaction falls outside the scope of the "stop-payment" clause, and can be continued, even at the borrower's objection.
Online cash advance lenders are required by law to notify their customers that they have the right to revoke electronic payment authorization at any time. In order to properly exercise this right, the lender and bank should both be notified within three days of the approaching debit transaction. If asked, the lender is required to tell you how to properly stop the authorization, but you should read the fine print of your contract to ensure that your lender is following the rules.
The industry rules of the cash advance providers often require that you contact the lender in advance, informing them of your desire to revoke their electronic access authorization. Subsequently, the customer's bank should be notified, providing them supporting documentation if needed. Ensure that you retain copies of the loan contract, since it is often hard to contact, or even to find, an online lender after you have made your transaction. By keeping copies of the loan documentation, it is far easier to track down the company, and ensure that they are playing by the rules.
Of course, just having the rights doesn't mean anything if you don't exercise them. It isn't always easy to exercise your banking rights, but you still have the option, if you're willing to put in the time and effort. Sometimes, however, exercising your rights can be difficult. Banks often put stop-payment orders on certain check numbers and amounts, but are often unable to link that with the person to whom the check is written.