Blog Post

15
OCT
2013

Automatic Deductions from your checking account/debit card may violate the law!

Automatic Deductions from your
checking account/debit card may violate the law!

          You may be making recurring payments by automatic deductions from your checking account or debit card. These transactions may be on a monthly, weekly or other regular basis and could be for debt payments, student loans, insurance payments, bills, etc. Fortunately, the Electronic Fund Transfer Act (“EFTA”) is a Federal law, requires that certain steps be taken to protect you and others from these charges. Do note however that single automatic payments and recurring payments made by credit card are not covered.

Specifically, monthly debits from one’s checking account may only be authorized if signed by the consumer. In other words, it can be a violation for a financial institution to deduct monies from a person’s checking account/debit card on a recurring basis when the only authorization is given by telephone. In all cases, the party that obtains the authorization must also provide a copy of it to the consumer. If it is not, your EFTA rights likely have been violated and monetary damages may be awarded!

Another right provided is the ability to stop payment of theses recurring deductions. The consumer must be able to cancel a payment by notifying their bank orally or in writing at least (3) three business days before the scheduled transfer date. Many EFT contracts however state that such cancellations must be made in writing for more than (3) three days in advance which violates the EFTA. Moreover, you have the right to be notified of all varying payments at least (10) days in advance. That is, when a pre-authorized electronic fund transfer from the consumer’s account will vary in amount from the previous transfer under the same authorization, or from the pre-authorized amount, written notice must be provided of the amount and date of the transfer at least (10) days before the scheduled transaction takes place.

What does this mean for you?

The EFTA allows for damages, attorneys’ fees and costs to the consumer: Any company that fails to comply with any provision of the act is liable in an amount equal to the sum of:

  • Any actual damages sustained by the consumer as a result of the violation;
  • In the case of an individual, statutory damages of up to $1,000;
  • In the case of a class action, (1) damages for each named plaintiff/consumer
    (actual and statutory), (2) such amount as the court may allow for all other class members without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1% of the net worth of the debt collector; and (3) in the case of any successful action, the costs of the action and reasonable attorneys’ fees.

What should you do? If you are making any recurring payments by debit card or by automatic withdrawals from your checking account, find out how those transfers were authorized. Did you only give permission over the phone? Do you have a written agreement allowing the debits to take place and was a copy provided to you for your records? If you answered yes to any of these questions, please contact Evan at (954) 227-7529, (866) I SUE YOU (478-3968) or evan@attorney4life.com. Do note that any attorney’s fees and costs awarded are paid by the violating company! If it turns out that no EFTA violation has occurred, there are no attorney’s fees and costs due for the representation.

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