Before applying for a payday loan, you need to be critically aware of the way they operate, know the involved costs, and be aware that the lenders could possibly be taking advantage of your situation, and illegally.
If you have already applied and qualified for a payday loan, you will have given the lender the right to automatically withdraw payments from your bank account. You can stop these withdrawals and here is how;
- Notify your bank to stop payment on the withdrawal.
- Vontact the payday lender to stop taking the withdrawal
- Close your bank account to stop automatic withdrawals.
Stopping withdrawals does not, however, mean that you shouldn’t pay the loan. You should negotiate with your lender on alternative methods of payment to avoid your account going to debt collectors.
What Are Payday Loans Work And How Do They Work?
These are loans of small amounts that are to be repaid on the next payday, which is usually in 2 weeks or a month. The APR (Annual percentage rates) are very high, usually ranging between 200-500%. The borrower gives the lender a post-dated check of the amount lent, plus rates and fees. This and your bank account details will ensure that immediately funds are put in your account, the lenders can access them and get back their money
To qualify for a payday loan, you will be required to provide an Individual Taxpayers Identification number or social security number, Government issued ID, a working phone number, an account number, recent pay stubs, and proof of income. Most payday loan creditors do not review credit reports or look at your credit scores.
How Do I Stop Automatic Payments From My Bank?
To stop automatic payments on a payday loan, follow these steps carefully:
Confirm the ACH Authorization Details
Locate the section in your loan agreement titled “Automated Clearing House Credit and Debit Authorization Agreement” (ACH Authorization). This section gives the lender permission to withdraw funds directly from your bank account. It should also include instructions on how to revoke this authorization.
- Invalid ACH Authorization: If the ACH Authorization does not clearly outline how to stop payments, it may be invalid. In such cases, you could be eligible for a refund of payments already made.
Revoke the ACH Authorization
To stop the withdrawals, follow these steps:
1. Write a Formal Letter:
- Include your account number, name, address, and the date.
- Clearly state your request to revoke the ACH Authorization
2. Send the Letter to the Lender
- Mail the letter to the lender using a trackable method (e.g., certified mail) to ensure delivery.
3. Notify Your Bank:
- Provide your bank with a copy of the letter.
- Request that the bank blocks all future withdrawals from the payday lender.
By following these steps, you can stop unauthorized payments and protect your funds.
Speak To Your Bank to Stop Withdrawals
If you give your bank notice in writing, by phone, or in person, they should stop automatic withdrawals. Banks also have online forms that you can fill out to stop automatic withdrawals. Accurate information on the amount and date of transfer should be provided to the bank alongside a copy of the ACH Authorization.
Closing Your Bank Account
As a last resort to stopping these automatic withdrawals, you should try closing your bank account. You will have to close your bank account if;
- You can’t afford the stop payment fees
- You do not have time to notify your bank to stop the withdrawals
- Your payday lender is not responding to your request to stop the automatic withdrawals.
You should enquire from your bank if it is necessary to close the account. Remember that stopping the automatic withdrawals does not mean that you are excused from paying your loan. You still have to pay your loan. You might want to consider other payment arrangements so that your account does not go to debt collectors.
Go Debt Free With Encompass Recovery Group Now
At the Encompass Recovery Group, we offer financial consultation and counseling and give you viable solutions to your financial problems. We ensure that you are informed on the right channels and ways to repay your loans and provide financial planning so that you can repay your loans and not strain your finances. If you need the advice to help you become debt-free, do not hesitate to call us!