How to Stop an Automatic Deduction From Your Bank

Automatic withdrawals from your checking or savings account are electronic Automated Clearing House transactions that require prior authorization but no further action on your part to complete scheduled withdrawals. When it comes to stopping pre-authorized transfers, the federal Electronic Fund Transfer Act outlines your rights and responsibilities, as well as those of your financial institution.

Step 1: Notify the Merchant or Service Provider

Call the creditor and tell it you want to cancel automatic withdrawals and ask for written confirmation via email or postal mail. If you don't receive written confirmation within a few days, write and send a cancellation letter via certified mail with return receipt request.

Step 2: Notify Your Bank

The EFTA says your bank must honor an automatic transfer cancellation request. This rule applies even if you haven't already notified the creditor or if you have and the creditor hasn't confirmed your request.

The rules also say that you must notify your bank at least three days before a scheduled withdrawal. Although you can give notice orally, it's critical that you follow the instructions your bank gives about following up with a written request. Although your bank can accept an oral request, many require a follow-up letter within 14 days. If you fail to comply with this requirement, an oral request will expire after 14 days and previously authorized automatic transfers will resume on the nest scheduled withdrawal date. The U.S. Treasury Department recommends that you include copies of any written communications between you and the creditor.

Tip

According to EFTA rules, your bank must tell you whether it requires written confirmation and give you the correct mailing address at the time you give an oral stop payment notice.

Tip

Write a confirmation letter from scratch or modify a template from a personal finance or a banking website.

Tip

You have the right to file a complaint if the bank continues to process automatic withdrawals after you withdraw permission. The Treasury Department has an online complaint form or you can print a paper form.

An Alternate Solution

Closing your bank account is an alternative solution. If you choose this option, the Consumer Federation of America recommends that you change banks. Opening a new account at a different bank will ensure a creditor can't access your bank account funds.

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