Yes, it is possible to cancel ACH payments from your lender, as long as you write a letter to your lender and your bank in a certified format. ACH payments are a type of money transfer between banks made through the ACH or Automated Clearing House network.
Payday lenders in America use the system known as ACH Authorization to automatically collect repayments on your agreed-upon repayment date each month until your loan is fully paid-off.
Can I Prevent ACH Payments?
Yes, you can block payday loan companies from debiting money out of your account. You may decide to take this action because you need the money urgently or perhaps do not have enough in your account for the payment to be taken.
To stop automatic payments on a payday loan, you need to;
- Notify your payday lender to stop taking the withdrawal,
- Notify your bank to stop payment on the withdrawal.
You can close your bank account to avoid an automatic withdrawal as a last resort. However, be aware that stopping automatic withdrawals doesn’t mean you don’t have to repay the loan. You should try to negotiate other payment arrangements with the lender.
How to Stop Lenders From Withdrawing Money From Your Account
1. Send a Certified Letter to the Payday Loan Company.
Firstly, you can send a certified letter to the payday lender, which will be legally binding and confirm a stop on your bank account. This is something that the lender has to adhere to by law.
2. Send a Certified Letter To Your Bank or Credit Union.
Whoever you bank with, whether it is your US bank or credit union, you must ask for the stop to be placed on their end too.
Using the certified letter, it confirms that the payday lender no longer has permission to take payment from your account and it revokes the ACH authorization.
This will in turn stop the lender from collection money automatically from your account.
3. Submit a Stop Payment Order on a Payday Loan (However, You Must Ask Your Bank First)
You can request a stop on an upcoming payment, as long as it is 3 days before its intended date. So this would be 3 days before your scheduled repayment date.
You will need to contact your bank for this or send another letter.
4. Clear Your Account or Get Debt Settlement
Ultimately, one final way to stop payday loans companies from taking money from your account automatically is by clearing your account and getting this all paid off. Once the debt has been paid, they cannot and will no longer need to take payments from you.
How Do ACH Payments Work?
Payday loans companies in the USA use a system known as ACH Authorization to automatically take payments from your bank account on each repayment date.
This is a convenient and practical way to collect repayments for all parties involved, as ACH Authorization involves automatically takes collections for lenders on days that have been agreed.
It is also practical for customers since they just need to have money in their account ready for collection and it will be taken – there is no need to call up, make a manual payment, go to a bank or send in a cheque.
Automated or recurring payments are very common for paying back loans, including personal, installment loans and mortgages.
It is similar to a direct debit or standing order, but these you can cancel on your end, meanwhile an ACH Authorization has to be cancelled by the lender or the bank.
Can I Cancel a Payday Loan?
Yes, you can cancel a payday loan.
If you check the terms and conditions of your payday loan when you apply, there is usually a clause which allows you to cancel it within 24 or 48 hours without being charged any fees, or you will only be charged one day’s work of fees which can be more manageable.
If you wish to cancel at a later point, you may just have to pay any interest that was accrued until that date. For example, if the loan is open for 14 days, you will pay 14 days of interest. But often, if you have the loan open and wish to cancel it, you will have to clear the debt in full and ideally pay it all off on time.