Payday loans are short-term, high-interest loans that come due on the borrower's next pay date. While they can seem like a quick fix to an emergency cash flow situation, payday loans often trap customers in a cycle of repeated borrowing that can lead to overwhelming fees, over-drafted bank accounts and a sinking feeling that there's no way out. Before you risk having your checking account closed because of too many overdrafts, take action to make sure your payday loans don't bankrupt your bank account.
Contact your payday lender. Ask for the branch manager, explain that you need to stop payment on your loan immediately and ask if another payment arrangement can be worked out. Accept responsibility for the loan by promising to pay it back in full as soon as possible. If the manager refuses to cooperate, inform him you are sending a formal letter revoking authorization to debit your account for the loan, to see if he changes his attitude. Ask for a fax number and an address where you should send the letter.
Check your state laws and regulations to verify that the lender has not broken any laws in lending you funds. Some states, such as North Carolina, do not permit payday lending of any kind. If you received a payday loan online and are a resident of North Carolina, the loan is illegal and the lender could be prosecuted.
Write a letter revoking authorization. Open a professional letter template in Word or another word-processing application. Type your address, the date and the address of the payday lender. In the body of the letter, include the following statement: "I hereby revoke any and all ACH debit authorizations with your company from debiting any of my personal accounts, per federal law, Regulation E, Section 205.10, pre-authorized transfers." If you discovered that the lender violated your state's laws, reference that violation and law in your letter. Sign the letter. (ACH stands for automated clearinghouse, a network that electronically processes money and allows payday lenders to debit money from your account.)
Fax or mail your letter by certified mail. Take the letter and proof of fax or mailing to your bank and ask to speak with a branch manager. Explain your situation. Ask if the manager would advise closing your account and reopening it under a different number, or if it would be less troublesome to put a stop on all transactions from the lender. Stop payment orders can be expensive, and many payday lenders have multiple electronic identities by which they can attempt to force transactions through your account. Try to chose the option that has less bank fees. Fees vary among banks.
Under federal banking laws, stop payment requests that are written will expire after six months. When this happens, lenders can again attempt to cash the check. Verbal stop payment requests will expire after 14 days.