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Yes, it is possible to get a payday lender to stop collecting money from your account, provided that you write a letter to your lender and your bank in a certified format. This can stop any automatic payments going out, whilst maybe you are trying to sort out your finances elsewhere or if you feel that something is not right and a lender is overcharging you.

 

Key Points

  • Payday lenders in the US use a system known as ACH Authorization to automatically collect repayments on your pay date each month
  • ACH Authorization is very convenient – it automatically takes collections for lenders on days that have been agreed
  • It is also practical for customers since they just need to have money in their account ready for collection and it will be taken – there is no need to call up, make a manual payment, go to a bank or send in a cheque.

 

How Do Payday Lenders Collect Repayments Automatically?

Payday loans companies in the USA use a system known as ACH Authorization to automatically take payments from your bank account on each repayment date.

This is perfectly legal and is very convenient and practical way to collect repayments for all parties involved.

For the lender, it allows them to ‘ping’ every customer’s account who owe them money and collect from potentially hundreds or thousands of people each day. For the borrower, it means that their collection is taken automatically and there is no need to call up, send in a cheque, go to the bank or make a manual repayment. As long as they have money in their bank account, their monthly collections are made on time and it is business as usual.

Automated or recurring payments are very common for paying back loans, including personal, installment loans and mortgages. It is similar to a direct debit or standing order, but these you can cancel on your end, meanwhile an ACH Authorization has to be cancelled on the lender’s or bank’s end.

 

 

Why Would I Want a Payday Lender To Stop Taking Automatic Payments From Me?

It is perfectly normal and legal for the payday lender to take automatic repayments and it is something that you will be signed and agreed during your loan agreement. 99% of people will not have any issues with payments being taken automatically by the lender.

However, there may be circumstances where you may want the automatic payments to stop, for instance:

You do not trust the lender – If you feel that you are being overcharged by the lender, you may want collections to stop immediately. Whilst there is strong regulation in the US, this should not happen, but more than 5 years ago, this was an issue.

You have other debts or financial qualms – If you are paying back other debtors for credit cards or loans, or you need money now, you can stop the payments from being taken and use this amount owed for yourself (e.g $100 or $200). Whilst you can stop the payments, your loan will still be outstanding and you may incur late fees for missing repayment.

Stop Payday Loans Companies From Debiting Your Account

 

4 Ways to Stop Payday Loans Companies From Debiting Your Account

 

1. Send a Certified Letter to the Payday Loan Company

You can send a certified letter to the payday lender, which will be legally binding and confirm a stop on your bank account. This is something that the lender has to adhere to by law. You can use the sample letter provided here >>

 

2. Send a Certified Letter To Your Bank or Credit Union

Whoever you bank with, whether it is your US bank or credit union, you must ask for the stop to be placed on their end too. Using the certified letter, it confirms that the payday lender no longer has permission to take payment from your account and it revokes the ACH authorization. This will in turn stop the lender from collection money automatically from your account. You can use the sample letter provided here >>

 

3. Submit a Stop Payment Order on a Payday Loan (You Must Ask Your Bank)

You can request a stop on an upcoming payment, as long as it is 3 days before its intended date. So this would be 3 days before your scheduled repayment date.

You will need to contact your bank for this or send another letter – you can use this one provided >>

 

4. Clear Your Account or Get Debt Settlement

Ultimately, a way to stop payday loans companies from taking money from your account automatically is by clearing your account and getting this all paid off. Once the debt has been paid, they cannot and will no longer need to take payments from you. Simple.

If you feel that you are being overcharged and want to stop them, this is a different scenario and you will need to complain to the OLA or SEC to escalate your case.

If you are having financial problems, you may look at using debt settlement or debt management. This is a structured program to compile and help you settle all your debts. In this case, your debt settlement provider will arrange the stopping of automatic payments and send a small figure to all your creditors each month, even if this is just $5 or $10, until eventually you are debt-free.

Debt settlement takes all your outstanding debts and looks at your income and monthly expenses to organise how much you can pay each company one-by-one. It means living on a pretty serious budget for the next few years, but it can certainly stop the pressures of automatic payment and being behind on your debts.