Protecting the Rights of Consumers
For Over 25 Years
Edelman Combs Latturner & Goodwin, LLC
The Consumer Financial Protection Bureau (CFPB) entered into a settlement with USAA Federal SavingsBank. The CFPB complained that USAA would not allow consumers to stop debits of their accounts by payday loan companies. Under the Electronic Funds Transfer Act, consumers have an absolute right to instruct their financial institutions to stop debiting their accounts. The permission of the other party to the underlying transaction, whether a payday lender or otherwise, is not required.
Complaints Against USAA Stop Payments
The CFPB complaint against USAA alleged that USAA was refusing to "enter stop payments or by requiring consumers to contact the merchants initiating the EFTs [Electronic Fund Transfers] as a prerequisite to implementing stop payment orders. In some of these instances, USAA failed to enter stop payment orders because consumers requested to stop payments to payday loan lenders.... " Through at least April 2013, USAA's internal procedures said: “If the account holder wishes to dispute a payday loan, instruct the account holder to contact the lender to dispute the transaction(s).” On numerous occasions, USAA representatives refused to investigate errors because they concerned payday loans. The CFPB also alleged that USAA told consumers that “If we determine that the ACH debit in question was authorized, you will be putting your USAA membership at risk. What this means to you is that you may become ineligible to purchase additional USAA products and that existing USAA accounts may be closed. Also, please understand that it is a federal crime to make a false statement to a bank and this is punishable by a fine of up to one million dollars or imprisonment for up to 30 years or both.”
What Are Your Rights Against Debits From Payday Loan Companies?
You have an absolute right to direct your financial institution at which you have a deposit account to refuse to honor a transaction. The payday loan company or another payee may have a claim against you for breach of contract, etc., but your bank cannot refuse to honor your instructions.
Please call Edelman Combs Latturner & Goodwin LLC at (312) 626-3585 if your bank refuses to honor requests to stop debits. We provide free initial consultations.
Payday Lenders Use Trickery to Put Debits Through
Payday lenders and others have been known to engage in trickery to put debits through, such as using multiple debits for less than the full amount. In order to be absolutely certain you do not have further debits, we suggest that you close your account and change financial institutions.
How to Close Your Bank Account
If you live by using your debit card daily, stop using it today and withdraw the cash from your financial institution. Use cash for a week or two until you can open a new checking account, obtain new debit cards and close your old checking account. Also, you should immediately visit your financial institution and opt-out of overdraft protection, which can be used to pay unwanted debits. Do this in person and get a copy of the form.
Before closing your old account, open a new checking account at a credit union or local bank. This will prevent a payday lender or other party from continuing to submit debits. Do this before closing the old account so you are certain you will have a checking account.
Review your current account and see if you have any outstanding checks, debit card items, or have authorized others to access your account (Automatic Payments for insurance, mortgage, cell phone companies, etc.). Also, determine how long it will take your employer to move the direct deposit of your paycheck to another financial institution. Complete the paperwork to move your direct deposit as soon as possible.
Inform anyone you want to be able to debit your account of your new account information and complete any necessary paperwork, or just have them bill you (safer).
Once you have a new account, know when your paycheck will be deposited there, have advised legitimate creditors to either debit the new account or bill you, and have stopped writing checks on the old account, allowing sufficient time for any outstanding checks and debits to post, close the old account. This should be done in person. Ask that the account be "hard closed" so no additional transactions will be authorized in the future.
The CFPB announcement regarding USAA follows
The Consumer Financial Protection Bureau today announced a settlement with USAA Federal Savings Bank, a federally chartered savings association headquartered in San Antonio, Texas.
As described in the consent order, the Bureau found that USAA violated the Electronic Fund Transfer Act and Regulation E by failing to properly honor consumers’ stop payment requests on preauthorized electronic fund transfers, and by failing to initiate and complete reasonable error resolution investigations. USAA also violated the Consumer Financial Protection Act of 2010 by reopening deposit accounts consumers had previously closed without seeking prior authorization or providing adequate notice.
Under the terms of the consent order, USAA must, among other provisions, provide approximately $12 million in restitution to certain consumers who were denied a reasonable error resolution investigation, and pay a $3.5 million civil money penalty.