How to Stop Automatic Payments

Whether you want to turn off autopay or stop automatic payments on a payday loan, you always have that ability. Some companies will refuse to give you the option to turn off autopay but that isn’t legal. Federal law allows you to revoke an autopay authorization at any time.

Avant (and other online lenders) make it hard to stop autopay.

A friend of mine received a loan from Avant back in 2016. Although the payments fit into his budget, the timing of those payments did not.

As you probably already know, living paycheck to paycheck is difficult enough without having a company withdraw money on odd dates. This friend paid all of his bills on the same date, but Avant consistently took the money out on odd days and caused his account to overdraft.

Since Avant would not let him change the withdrawal date, he decided to revoke authorization for automatic payments altogether.

The problem?

Avant doesn’t allow you to do that. At least, not officially. Any attempt to remove authorization through the company will be met with opposition – and that makes sense, because it removes the guarantee of payment. Avant counts on that guarantee to make sure they’re getting paid.

But it doesn’t matter what Avant or any company does or doesn’t allow because federal law allows you to revoke autopay authorization at any time.

Federal law protects your right to stop automatic payments.

Federal law is very clear. As a customer, you have the right to stop a company from taking automatic payments from your account at any time.

You have the right to stop a company from taking payments from your account, even if you previously allowed them. For example, you may decide to cancel your membership or service with the company, or you might decide to pay a different way.

Consumer Financial Protection Bureau

This is a huge because a lot of people who borrow money online end up unable to pay it back without wrecking their finances. It becomes a trap. Low income people borrow money because they need it, but then those automatic payments make them overdraft again and again until they’re even worse off financially than they were before they borrowed the money.

In 2016, the Consumer Financial Protection Bureau found that over half of online borrowers rack up an average of $185 in bank penalties because at least one debit attempt overdrafts or fails. One third of those borrowers end up having their accounts closed because they can’t pay back the overdraft fees.

It’s very frustrating because companies will often try to force the payment over and over again if it fails, leading to more and more overdraft fees. Each fee makes it harder and harder for the borrower to ever repay the debt. The result? More debt they can’t afford.

That’s why it’s so important to understand your rights when it comes to debt collectors. You also need to know that you have the right to stop automatic payments whenever you want to. You’ll still owe the debt but they won’t be able to automatically withdraw the money from your account without your consent.

As with any legal matter, it’s important to consult with an attorney about your specific legal situation. There may be things that you haven’t considered that could affect you.

You do have rights regarding automatic payments, and there are circumstances where revocation is appropriate. For instance, if you choose to cancel a membership, subscription, or service, it is usually straightforward to stop automatic payments. 

Also, if you wish to pay by a different means, you should be able to do so without repercussions. To remain legally compliant, you need to formally revoke authorization, communicating with the company in question and informing them of your decision to stop automatic payments. You also need to notify your bank of your choice. 

You can stop an automatic payment simply by issuing a “stop payment order” to your bank. However, be mindful. Always check terms and conditions before canceling your payment. If this action means you’re in breach of contract, or that you will miss payments, it can impact your credit ratings and leave you liable to litigation. Always read the small print to see what the legal implications of your decisions could be.

Martin Gasparian, Attorney and Owner of Maison Law

Here’s how to stop automatic payments.

According to the Consumer Financial Protection Bureau, there are several steps you can take to stop automatic payments. The process is fairly straightforward.

Start by contacting the company.

Tell the company that you are revoking your ACH authorization. You need to do this in writing, preferably in a professional letter. You can send the letter via email but I recommend sending it via certified mail as well so you can get proof of delivery.

The CPFB has a sample letter on their website. This letter gives you the option to revoke authorization for your next payment or for all future payments, depending on your preferences.

It’s important to include your name, account number, and a statement that you are revoking your authorization for automatic payments.

Contact your financial institution.

Sometimes the company won’t respond. If that’s the case, you will also need to notify your bank or credit union that you have revoked authorization for that transaction.

You can use the CFPB’s sample letter for banks and credit unions to do this. If you prefer to write your own, make sure to include the name of the company, the payment amount (or range) and the dates that they normally appear on your account. You’ll also need to provide your name and account number.

Stop Payment Order

If the prior steps do not work, you can instruct your bank to stop allowing those payments with a Stop Payment Order. This also requires another letter but, of course, the CPFB has one you can use.

You will need to give your bank at least three days’ notice before the payment is scheduled. However, you can give the initial notice over the phone, in person, or in writing.

You just need to make sure you follow up with formal written notice within 14 days of your verbal notification. If you don’t, the payments may continue in the future.

Some banks will charge a fee for stop payment orders.

Monitor Your Accounts

Continue to monitor your accounts and let your financial institution know if any payments slip through. Federal law protects you, so if unauthorized transfers happen then you should be able to get that money back. You just need to make sure that you notify your bank in time.

What happens next?

Once you’ve taken the steps to stop automatic payments, the company you owe won’t be able to automatically take your money out of your account any more. However, you will still owe the debt to that company. Stopping automatic payments does not invalidate the debt.

You need to understand that the company may decide to take action against you. If you don’t make your payments as agreed in your contract, they could even sue you for the debt.

If that happens, you’ll want to consult with a free legal aid service or use a tool like SoloSuit to help you answer the lawsuit. You have to answer every debt lawsuit or you could end up hit with a default judgement. Basically, if you don’t answer, the courts can give the company whatever they ask for. That’s a bad situation, so make sure you ALWAYS file an answer!

Nicole Thelin

Nicole is the founder and lead researcher of Low Income Relief. After a personal experience with poverty and homelessness following her husband's sudden medical discharge from the U.S. Army, Nicole discovered the life-changing impact of community resources. This experience ignited her passion for empowering others to navigate similar crises. Nicole launched her writing career at age 16, working for various newspapers and publications. Her commitment to in-depth research and accessible content has been recognized by Google for Publishers and other industry leaders. For over 20 years, she has applied her investigative skills to uncover the most helpful, up-to-date information on benefits programs and community resources, ensuring Low Income Relief maintains the most extensive resource databases available.