Regulator Reinforces Rules Against Illegal 'Auto Debits' from Consumer Accounts

Have you had money automatically debited from a bank account or charged to a debit card by a company without authorization? Or has a company refused to stop these “auto debits”?

If so, you are not alone. The U.S. Consumer Financial Protection Bureau says that Americans often fall victim to unauthorized auto debits. The Bureau has released a bulletin reminding companies that they are legally required to provide notifications to consumers that “clearly describe the terms of preauthorized auto debits.”
In addition, the Bureau is publishing action letters today for consumers seeking to revoke a company’s authorization to auto debit an account.
From the Bureau:

Millions of consumers authorize companies to automatically deduct payments from their deposit accounts for recurring expenses such as subscriptions, memberships, a mortgage, credit card, or other monthly bills. To ensure that payments are timely, companies often seek out consumer permission for these preauthorized charges. Companies, however, must obtain required consumer authorization before debiting an account.

The CFPB is concerned that some companies may be failing to meet the legal requirements for obtaining authorizations from consumers for recurring auto debits.
The bulletin stresses that the Bureau expects all companies to get required consumer authorization before automatically debiting a consumer’s account.
The Bureau also says that company must keep clear records on what the consumer has authorized and provide consumers with a copy of those terms. This information can include the amount the consumer agreed to, the recurring nature of the debits, and the timing of the payments. To help ensure that consumers are informed, the CFPB encourages companies to provide a copy of these terms prior to initiating the first auto debit.

Sample Letters for Consumers
The CFPB says that consumers can use the following sample letters to communicate with their bank, credit union, or the company charging the auto debits:

  • A sample letter to send to a company or merchant to revoke the consumer’s permission to auto debit the account
  • A sample letter to send to a bank or credit union to provide notice that the consumer revoked a company’s authorization to automatically debit the account
  • A sample stop payment order to instruct a bank or credit union to stop allowing the company to take payments from the consumer’s account
  • A sample letter to a bank or credit union providing notice of an unauthorized debit from a consumer’s account

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