Automatic debit payments from bank accounts can be a convenient way to pay regular bills, saving you time, checks, and postage. These days, people preauthorize monthly payments for everything from mortgages, student loans, credit cards, and utilities to car payments, life insurance premiums, and health club memberships.
But you can get into trouble if your automatic payment goes awry.
An automatic debit payment is when you give permission to a company, like a merchant or lender, to directly take payments out of your bank account on a recurring basis.
Automatic debit payments are different than the recurring bill pay feature your bank offers. With recurring bill pay, you give permission to the bank to make payments to the company. With automatic debits, on the other hand, you give permission to the company to withdraw the payments from your bank account.
If your bank makes an error in dealing with your automatic debit payments, you might face problems such as the following:
You have the right to halt unauthorized and most preauthorized deductions at any time. Your bank might also have to cover late fees caused by its late payments. If you have a problem, here's what to do.
If you think your credit history was tarnished because the bank was late or missed payments, get copies of your credit reports from the big credit bureaus—Experian, TransUnion, and Equifax. If they show missed or late payments the bank was supposed to make, contact the bank and request (politely but firmly) a letter explaining that the error was the bank's fault. Contact the credit bureaus and ask them to correct the incorrect information.
Taking these steps should resolve the situation, but if it doesn't, you can ask the bank to provide correct information to the credit bureaus. If all else fails, you have the right to add a brief statement to your credit files explaining that the bank missed the payment or made it late.
Credit Repair, by Amy Loftsgordon and Cara O'Neill (Nolo), is a comprehensive guide to repairing your credit and includes sample letters and forms.
If you've exhausted all other options for correcting your credit reports, consider talking to a consumer law attorney or debt settlement lawyer who can help you enforce your rights. You have the right to sue a credit reporting agency that violates your rights under the Fair Credit Reporting Act, including continuing to report incorrect information.
An attorney can also assist you if you're having problems with your bank how it is handling unauthorized or preauthorized automatic debit payments.
Need a lawyer? Start here.