ngp

I'm not sure if this belongs here or not but I thought I'd post it to warn others of a lack of service that banks have that you should look out for.

Many merchants require that they debit your checking account directly for services. Daycares are notorious for this but more commonly, people may be familar with Paypal.

I called up my Bank to tell them that since our child will no longer be attending the Daycare provider that we've been using for the past three years, I would like to "terminate" the authority for them to automatically debit my checking account. My bank told me that the only way to do that was to put a stop for an EXACT amount but if the charge from the daycare was anything but that amount (even by a penny) the debit would still go through! I asked why they can't simply indicate that this merchant was no longer authorized to debit my account....they said that they couldn't do that and that it is common in the industry (which I'm not sure is true).

I told them that when the rates are increased in 2003, the amount will be different, when a child goes more or less hours to daycare, the amount will be different, if someone mistakenly or with bad intent decides to debit my account for $500 one day, it would go through!

The customer service rep mentioned that unfortuantely, that is the only option that I have and if a charge was to appear without authorization (which is now very loosly defined), I can put in a claim to have it investigated and immediately credited back to my account, with the burden of proof lying on the merchant.

So, long story short, watch out before you decide to let anyone auto debit your account....make sure you can get out of it easily enough!

Heat

No, your other option is to close your account and reopen one in a new bank. Be sure to also close your reserve line of credit (if you have one attached to this account).

Health clubs are also notorious for doing this (requiring direct debits).

I heard one story of this lady who tried to stop a debit but the bank wouldn't "let" her do it, so she cancelled her account. But she didn't cancel the reserve line of credit. Even though the account was closed, the bank was still paying the debit, and taking the money from her reserve line of credit. Once that was used up they sent her a letter saying that she needed to start making payments on her loan (which is what the reserve line of credit actually is). Obviously she refused, and the bank ended up eating the loss (which was right).

Anyway, back to your case, I would just close your account and open a new one at a different bank. Sounds extreme, but it is the only effective way to stop a debit payment.

ngp

I agree with you and will probably do that. The down side is the frustration of making sure all my checks have cleared, reallocating our payroll deposites, etc.

The one other thing that the customer service rep told me is that if and when I close the account, make sure to tell them that there were auto debits on the account. Apparently, the account will automatically be reinstated if an auto debit was applied.....go figure!

Heat

They may reinstate the account and charge against it, but that doesn't mean that you are legally responsible for paying the debt. Tell the bank that there may be an automatic debit coming against the closed account, but that you will refuse to pay any debits to your account after it is closed. And of course if they later say that they paid an automatic debit for you by opening up your closed account, and that you owe them the money, refuse to pay.

I was thinking about this over lunch. If I was in a situation where I needed to set up an automatic debit, it would probably be worth it to open a free checking account somewhere and just deposit money in to that account each month to cover the autmatic debit. That way I could easily cancel the account without any headaches since it wasn't my main account, so there would be no checks or autmatic deposits.

kamalyn

Thats an odd thing. My bank will stop a vendor from using my account no matter what amount it is they are trying to charge. I had a problem with one company that kept charging me, even after I canceled with them, I called my bank and told them not to let this company charge my account ever again and they stopped it on their end. No problems at all.

Now, I use a credit union instead of a bank like Wells Fargo, so maybe its just that type of bank.

ngp

Heat....great idea about the free checking account for just this type of situation....thanks!