Do you agree with these statements from the following article:

- Once you give permission to a merchant to withdraw money from your checking account, you can NOT stop it unless the merchant agrees.

- you can NEVER stop the withdrawal authorization altogether... The only way to do it is to close ALL of your accounts with the bank involved. That’s because bankers will go into any of your accounts to make the withdrawals if the “authorized” account is short.

- You may think you are giving permission to a merchant for only "monthly payments" for a "specific amount" but you're not. ... once you give authority, you give blanket authority for any and all withdrawals.


*******************************************************************

Automatic Withdrawals

by - Tom Martino
February 11, 2005

--------------------------------------------------------------------------------

Imagine buying something very expensive and the clerk asks: "How do you want to pay for it?"

You answer: "Here are the keys to my house. Feel free to enter my home, go into the kitchen, grab my purse, open my wallet, and take out monthly payments."

Sound unbelievable?

In essence that's what we do when we give merchants permission to make automatic withdrawals from our checking accounts. You may consider it convenient but it can be a very dangerous practice.

Here are some things you should know that financial institutions and merchants do not openly tell you:

Once you give permission to a merchant to withdraw money from your checking account, you can NOT stop it unless the merchant agrees. So if you have a dispute with a merchant over a product or service you could have a big problem. Let's say you want to stop making payments but the merchant doesn't agree. You end up the loser.



If you were simply writing checks out of your checking account, you could choose NOT to pay a bill if you had a dispute. In that case the vendor would have to come after you in court to get payment. But with an automatic withdrawal, your bank gets involved and will NOT allow you to stop the withdrawals.


Your bank will let you stop one withdrawal at a time but that will cost you up to $25 each time you do it.



Keep in mind ... you can NEVER stop the withdrawal authorization altogether, unless the merchant agrees to it. The only way to do it is to close ALL of your accounts with the bank involved. That’s because bankers will go into any of your accounts to make the withdrawals if the “authorized” account is short.

Here is another aspect of automatic withdrawals you need to know about. You may think you are giving permission to a merchant for only "monthly payments" for a "specific amount" but you're not. Financial institutions do not have a mechanism for limiting the frequency of withdrawals nor the amount of payments. In essence, once you give authority, you give blanket authority for any and all withdrawals.

Many merchants charge a penalty fee when they try to debit your account and there is not enough money to make the payment. Since the withdrawals are automated, the merchant’ computer then keeps accessing your account (sometimes on an hourly basis) to check for available funds. Each time they check and find inadequate funds, you may be charged a penalty. Those charges can amount to hundreds of dollars in just a few hours!

I recommend you NEVER give any merchant authority to withdraw money from your account unless you follow these rules:



1. Establish a special account for automatic withdrawals. Keep only enough money in the account for the monthly payments that will be automatically withdrawn.





2. Do not have ANY other accounts with that bank (because they will go into other accounts).



3. Watch the account closely. If a merchant makes an unauthorized or inaccurate withdrawal report it immediately to both the financial institution and the merchant.



4. To stop automatic withdrawals, the only safe way is to close the account.



5. If you start a new account, make sure you do not give the financial institution authority to take from the new account to settle debits from other accounts you have (or had) at the same institution. Sometimes even after you close an account, a bank will honor an automatic withdrawal on the closed account. Then the bank will try to collect the amount from your new account.

Not sure where you saw this article, but it is extremely incorrect. If you want to post a link to it, I'd be hapy to respond.

Can you also print your response here so we can share this information? Thanks

Happy, you can find the article at troubleshooter.com (I googled the author and the title). The guy is a radio and television personality in the Denver area, with his show syndicated by Westwood One.

I think Mr. Martino needs to read Reg E.

I didn't read the whole article because it was so blatantly bad and wrong that it's going to get me riled up.

It's this stuff that makes me so aggravated. They spout off at the mouth without knowing the facts and it misleads people into believing things that aren't true. Just *irks* me (and that's me putting it the nice way. Insert your own swear words!)

A lot of the excerpt above gives the perception that the customer is not responsible for ensuring that the merchant #1 is legitimate and honest; and #2 only withdraws from the account as agreed. That's ridiculous! The customer has the responsibility to review their bank statements for unauthorized withdrawals. That's one of the risks the customer takes when dealing with a merchant (or scam as it could be). That is why I agree with #3 listed above.

Personally, I only allow regular bills to be paid automatically from my account IF it is a set amount each month (such as mortgage). If it is a variable amount (such as phone bill), I prefer to pay it with a check, just in case I would not agree with the provider - it's much easier to keep my money than get a refund check.

I agree with BOLers too. My irritation rests with this premise that nothing is ever the customer's fault. I will admit that there are unsavory merchants and maybe even banks that ruin it for the rest of us, and if you think about it...all the regs we have are in effect because some institution or group was taking advantage of someone and it needed to be stopped.

Anyway, It is also crucial that customers understand that banks have rights (like offset) to protect themselves also. These rights are held sacred and not abused, as is purported in the comments above.

One last thing I leave the reader with, if you exercise the caution discussed by my esteemed colleagues and you have a good relationship with your bank, this auto debit/withdrawl stuff is actually a great service and a handy convenience that wa orignally intended to allow customers to save time by going straight to the account instead of spending time writing lots of checks. I also think that if you ask the vast majority of people who are cautious about who they give authorization to and examine account statements regularly you will find they like and enjoy the service.

Also, consider the source. My two cents worth.

Sounds like he had a bad experience with a health club. The thing that's missing in Martino's article is that the consumer probably signed a contract with the merchant that includes a commitment not to cancel the debit authorization.

Ditto on the health club. In my experience, they really try to lock you in so you can't escape. Would be nice if these class action types would focus on them for awhile.

HEY - how about this thought? What if we could classify Health Clubs as MSB's?