Money & Debt

Question

I had some plumbing work done, and signed what I thought was a receipt for payment. Later, I noticed a transfer from my bank account to the plumber. When I called them about it, they said I’d signed a service contract, and had agreed to monthly payments from my bank. They said I couldn’t cancel. When I asked my bank to stop the payments, they said I had to deal with the plumber. What can I do?

Answer

Electronic payments are controlled by the federal Electronic Funds Transfer Act (EFTA), and Regulation Z. The rules are divided between payments that have already been made and payments that are going to be made in the future.

Starting with payments that are going to be made in the future, you have the right to cancel any planned payment by contacting your financial institution at least 3 business days prior to the payment and withdrawing your consent When someone gives permission for someone else to do something for the electronic payment by instructing them to not make the payment (or any further payments). The institution is then obligated to stop the payments. If payments are subsequently taken from your account now without your authorization, you may have remedies under EFTA.

Regarding payments that have already been made, you would need to submit a dispute to your bank. These are also controlled by EFTA and include some rules and regulations. For example, you must submit the dispute within 60 days of the withdrawal. It is recommended that you submit any supporting documentation if you have it. Your bank is obligated to respond to your dispute whether they decide to reverse the withdrawal or not. Part of that response A formal written answer to the plaintiff or petitioner's written statement will include instructions for submitting further documents if needed.

If you are not satisfied with the outcome you may have a claim under EFTA regarding the investigation that your bank did. Most banking agreements now include Arbitration When parties present their case to a third person instead of going to court. The arbitrator’s decision is binding. This means it becomes part of the final judgment even if the parties don’t agree with it. clauses, requiring you to submit any dispute to arbitration rather than filing a case in a court of law. This might be an advantage to you as consumer arbitrations are fairly easy to start and the filing fees fall mostly to the company. If you cannot find your agreement just google your bank name and arbitration and you will likely find the name of the arbitration company. There are only two major ones, JAMS and AAA.

Your bank should follow your instructions, and stop the withdrawals. If they won’t, close your account, and complain to the FDIC.

Your bank can charge you for stopping the payments—like they can for stopping payment on a check. But they can’t refuse to stop the payments.

EFTA calls regular payments “preauthorized transfers,” and specifically gives bank customers the right to cancel them.

The central idea is that it’s your money, so you control it. Not (usually) the bank, and definitely not outsiders, like credit card companies or merchants who want your money.

The authorization for a preauthorized transfer must be in writing, or electronic. Somewhat surprisingly, you can give an electronic authorization over the phone.  (That’s how phone scammers have been able to use a recording of someone saying “yes” to “can you hear Listen to and judge a case me?” as an authorization for bank withdrawals.)

Whoever takes your authorization for a bank transfer must give you a copy of that authorization. The plumber should therefore have given you something showing your authorization.

To stop a payment, you just have to tell you bank “orally or in writing at least three business days before the scheduled date of the transfer.” Banks can require a written cancellation within 14 days of an oral cancellation. If your bank wants it in writing, and you don’t comply, your “oral stop-payment order ceases to be binding after 14 days.”

You should also tell the plumber you’re cancelling the payments—in writing. Date it, and keep a copy for your paper trail.

The plumber—or anyone else getting paid by transfers from your account—can’t stop you from stopping the transfers. That’s strictly between you and your bank. The plumber may claim you’re breaching a contract by cancelling, but you’re generally better off dealing with that after protecting your bank account.  

If you tell your bank to stop payments “in accordance with the terms and conditions of the account,” and they don’t, EFTA says the bank’s liable to you. You only have 60 days to dispute unauthorized transfers with your bank, so be sure to check each monthly statement promptly.

If your bank simply refuses to stop the payments, close the account. And then complain to a regulator. The FDIC regulates banks; the Office of Thrift Supervision (OTS) regulates federal savings banks; and the National Credit Union Association (NCUA) regulates credit unions.