the Electronic Fund Transfers Act

This would be considered a totally off topic however, it has affected my customers in the past. Recently I wrote my State Senator Jay Wasson about this. I want to thank Senator Wasson for actually following through on this. Many times I have mailed, emailed and called my different State and Federal Representatives, Senators and Politicians, and rarely do I get a personal response and never has any of them actually investigated an issue. Thank you Senator!

To give a brief overview, some scumware sites and programs want your credit card or bank account number for payment or “to verify your age” (usually on porn sites). When you realize what is happening, normally they keep taking your money out of your account, you go to your bank and ask to stop payment and the bank says they cannot.

This article is applying to direct withdrawal out of your bank account, credit / debit cards are another matter and have different laws that affect their use.

I have experienced this with Bank of America and Peoples Bank of the Ozarks personally. Peoples Bank did eventually stop the payments and I want to thank them again for not being a brick wall. Several customers have reported similar issues after they “bought” scumware thinking it was security software or to have their data unhijacked. The banks I know of (that would not just stop payments) were US Bank and Empire Bank though I am sure there are others.

In each case the bank stated something about “the law” and the customer had to have the criminal issue a stop payment. Like that is going to happen. Because this not only happens with scumware but also with gym memberships, auto insurance et al, I decided to write Senator Wasson about it. Below is my original unedited email to him and below that is his response. I sincerely hope this helps many people out there. Armed with the facts and sections of the law, maybe your bank will act immediately on such an issue.

Sent: Tuesday, July 09, 2013 12:10 PM
To: Jay Wasson
Subject:  ECH – Banking

Senator Wasson,
I am writing because of a concern I keep running across.
When a person or business gives access to their bank account for automatic payments there is a strong gap in the law.
I have not run into this in years because I don’t give access to my account for this very reason.
Here are some examples of what I am talking about.
Storage rental unit takes out X amount every month, you move out, the storage unit still charges, you contact them, no response, you go to your bank and ask for the payments to be stopped and the bank says they cannot.
Some scum ware software gets into your computer, your kid enters your bank account number for whatever reason (porn or to attempt to cover-up porn et al), you find out, after the lecture and grounding, you attempt to call the scum ware people who don’t answer. You go to the bank, same answer, they claim, they cannot stop payments.

This is totally wrong! It is the person’s bank account and they should be able to stop any payments at any time without giving the bank any reason.
I have personally run into this with Bank of American and Peoples Bank of the Ozarks in the past for myself, I run into it many times a year for my business customers.

I hate to add laws, however, banks need to be forced to allow customers to control their accounts under all situations, I personally even believe with Child Support and IRS “claims”, however I am sure you could not get that part through.
It seems odd that it would take a law to force banks to allow people control of their own money but I am afraid that is what it has come to.

Your time and help are greatly appreciated.

Kent Ward
The Weekly Geek

The Senators reply:
Dear Mr. Ward:

Thank you for your correspondence regarding stopping preauthorized electronic funds transfers from bank accounts.

From the situations you described, there appears to be a Federal law, the Electronic Fund Transfers Act, that should address your concern. Specifically, one of the regulations, 12 CFR 1005.10 (known as part of Regulation E) states that:

Stop Payments
Consumers have the right to stop payment of preauthorized transfers from accounts. The consumer must notify the financial institution orally or in writing at any time up to three business days before the scheduled date of the transfer. (Section 1005.10(c)(1)) If the debit item is resubmitted, the institution must continue to honor the stop-payment order. (Staff Commentary 1005.10(c)(1)) The financial institution may require written confirmation of an oral stop payment order to be made within 14 days of the consumer’s oral notification. If the financial institution requires a written confirmation, it must inform the consumer at the time of the oral stop payment order that written confirmation is required and provide the address to which the confirmation should be sent. If the consumer fails to provide written confirmation, the oral stop payment order ceases to be binding after 14 days. (Section 1005.10(c)(2))

In other words, if you arranged for recurring payments out of your account to third parties, like insurance companies or utilities, you can stop payment if you notify your institution at least three business days before the scheduled transfer. The notice may be written or oral, but the institution may require a written follow-up within 14 days of your oral notice. If you don’t follow-up in writing, the institution’s responsibility to stop payments ends.

Although federal law provides limited rights to stop payment, some financial institutions may offer more rights. You can shop around to be sure you’re getting the best “stop-payment” terms available.

If the Federal Regulation does not address your concern, please feel free to contact me again  with more detailed information.

Senator Jay Wasson
State Senator, 20th District

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