When Creditors Cause Overdrafts

Many clients have called us recently with complaints about their checking accounts. Our clients’ creditors are causing their bank accounts to become overdrawn. Every time a creditor withdraws money from your checking account or processes a payment using your credit card, the creditor must have your permission before processing the payment.

Many creditors use written preauthorizations to withdraw funds from your account. The Electronic Funds Transfer Act regulates these withdrawals, and the law requires: (1) that your authorization is given in writing; (2) that your authorization occurs before funds are withdrawn; and (3) withdrawals recur at substantially regular intervals. This last requirement is the most-often ignored. Creditors may not use outdated authorizations to collect overdue charges.

If a creditor misuses your authorization, it can be liable to you for any damages that you suffer, including any overdraft charges or fees caused by bounced checks. The creditor may also be liable to you for a penalty of up to $1,000.

If any of your creditors has withdrawn funds from your checking account or processed payments using your credit card without your permission, please call us for a free consultation.

Comments are closed.