My colleague, Kevin Gipson, a bankruptcy lawyer in the New Orleans area, has written an important blog post on the Bankruptcy Law Network blog called “When is it Alright to Give a Debt Reduction Company your Bank Account Number?” Not surprisingly, the answer to this question is “never.” Let me repeat – you should never give a debt reduction company your checking or savings account number and authorization to deduct anything from your bank account.
Once authorization is given, it becomes your problem to revoke the authorization. Your bank will tell you that any dispute about authorization is a matter between you and the debt negotiation company. In just about every situation where my clients have tried to stop the automatic withdrawals there has been a delay and a problem.
If you find yourself trying to stop an automatic deduction, you should do so in writing by registered mail, return receipt requested. Send your revocation notice to both your bank and to the company you had authorized. You may need to get on the phone with your bank to find out exactly where and to whom your notice needs to go.
I would also like to expand on Kevin’s message. Not only should you never authorize a debt reduction company to tap your bank account but you should never, ever authorize a creditor to do so. I regularly meet with clients who have authorized a collection agency for a credit card or other lender to automatically withdraw funds from their checking accounts. Inevitably the collection agency draws too much or too frequently.
Finally, you should be aware that if you have a credit card account with the same bank or credit union that holds your checking or savings account, there is a possiblity that the fine print in the loan agreement includes an authorization for the lender to access your checking/savings account if your credit card account becomes delinquent. My advice, therefore, is to keep your main checking account at a different bank from your credit card issuing bank.
The bottom line here: you and you alone have to maintain control of your money. If you permit third parties to access your account bad things will likely happen.