An automatic withdrawal occurs when you grant your bank permission to make a payment to a creditor from your bank account. Automatic withdrawals provide you with a convenient, paperless method of paying your debts. Certain collection agencies demand that consumers make payments via automatic withdrawal. You have the right to both initiate and put a stop to automatic withdrawals from collection agencies.
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Collection Agency Withdrawals
Some, but not all, collection agencies use unethical debt-recovery procedures. One such process involves using an individual's banking information to make automatic recurring withdrawals from the current account. While automatic payments represent a legitimate way for consumers to submit payments, individuals sometimes approve a one-time withdrawal only to discover that subsequent, unapproved withdrawals have occurred. In other cases, a debtor will approve an automatic withdrawal for a certain amount and the collection agency will withdraw a much larger amount from the current account without consent.
Stopping Automatic Withdrawals
All banks' policies regarding automatic withdrawals differ, but you can sometimes terminate an automatic withdrawal by contacting your bank and requesting that it no longer honour automatic payment requests from the collection agency. Unfortunately, not all banks will honour your request to terminate automatic payments, and collection agencies do not always respect consumers' wishes for changing the current payment method. If your bank will not block automatic withdrawals from the collection agency, you have the option of closing the account and opening up a new account with a different financial institution.
A collection agency can legally withdraw money from your bank account without your permission if it holds a civil judgment against you from a previous lawsuit. A judgment holder can apply to the court for permission to garnishee your accounts via a bank levy. A collection agency can garnishee your bank account repeatedly until it recovers the full amount of the judgment.
You can prevent further automatic withdrawals from a bank levy by returning to court and contesting the collection agency's judgment. State guidelines vary, but in general you must present the court with evidence that proves you either do not owe the debt or the collection agency does not possess the legal right to collect the debt.
If you cannot successfully overturn the judgment allowing the collection agency to use automatic withdrawals to garnishee your bank account, you can protect certain forms of income from being seized. The U.S. Department of the Treasury notes that federal and state benefits you receive, such as student loan proceeds, Social Security, alimony and child support, are all protected from seizure by a commercial creditor. Filling out a claim exemption form with your bank ensures that your exempt funds remain protected from automatic withdrawals.
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- Credit Card Chaser; Will Settling Credit Card Debt Hurt Your Credit?; Joel Ohman; 2011
- Wells Fargo; Orders, Copies and Other Requests -- How Do I Change or Cancel Automatic Withdrawal?; 2011
- Bankrate; Creditors Can Garnish Your Bank Accounts; Justin Harelik; 2009
- Neighbourhood Economic Development Advocacy Project; Vacating a Default Judgment; 2007
- U.S. Department of the Treasury: Answers About Garnishments