Attorney General Raoul Encourages Illinoisans To Know Their Rights When Setting Up Autopay

CHICAGO – Attorney General Kwame Raoul today urged Illinoisans to understand their rights when setting up automatic payments – often referred to as autopay – for recurring fees like gym memberships, utility bills, subscriptions, student loans, car payments and mortgage or rent payments.

“While many consumers enjoy the ease of paying for recurring fees and memberships through autopay, it is important they have information on their rights and options when issues do arise,” Raoul said. “I encourage all Illinoisans to use the information contained in this Consumer Alert and never hesitate to contact my office’s Consumer Fraud Bureau with any questions or concerns.”

Attorney General Raoul is reminding consumers that although autopay can be convenient, it can also cause headaches if a company still processes charges after an autopay is canceled, the approved amount changes without warning, or payments are charged on a different date than originally scheduled. In these situations, Raoul reminds consumers they have important rights, including under a federal law called the Electronic Fund Transfer Act (EFTA). The EFTA provides consumers with important protections when payments are authorized by the consumer in advance on a recurring basis and are made electronically from a bank account or debit card.

Before preauthorizing payments, Raoul’s office recommends consumers:

• Verify the company. Only use autopay and share sensitive banking information with companies when you have verified the company’s legitimacy and reputation by, for example, doing an internet search for the company’s name with the words “scam,” “review,” or “complaint.”
• Read the terms of agreement. Companies must give consumers the terms of a payment authorization that allows the company to debit a bank account or charge a debit card. The terms must be laid out in a clear and understandable manner. Consumers are also encouraged to keep a copy for their records.

Once a payment is preauthorized, it is important to know what banks can and cannot do:

• Written authorization is required. Before a company can start collecting money through autopay, they must have a written or electronic authorization signed by the consumer. Upon request, the company must also provide a copy of the authorization.
• Autopayments can be canceled. Consumers can always revoke authorization at any time by telling the company or the bank. However, if consumers want to stop a certain payment, that revocation notice must be made at least three business days before the scheduled payment.While autopay can be canceled over the phone, it is best practice to also send a written notice of cancellation to both the company and the bank. The letter should clearly say that authorization is being revoked. A bank may need specific information and may also require a few days’ notice before a scheduled payment. Banks may also charge a stop-payment fee.
• Consumers cannot be forced to agree to autopay when repaying a loan. A company cannot require a consumer to repay a loan by automatic payment from a bank account or debit card as a condition for approving a loan unless the loan is an overdraft line of credit. Instead, the company must allow manual payments.
• If the amount of an autopayment changes, consumers have extra protections. Companies must let consumers know at least 10 days before a scheduled payment if the payment will be different from the authorized amount or authorized payment range. Companies must provide consumers with the differing payment amount and the date of the transfer.

Consumers are always encouraged to pay attention to their account balances, as an overdraft fee or insufficient funds fee may be levied if a bank account balance is too low when an automatic payment goes through. With the proliferation in the use of autopayment options, consumers are also encouraged to regularly check their bank statements for any subscriptions on autopay that are no longer in use or that have been forgotten about.

If a consumer spots an unauthorized withdrawal or a payment processed after authorization was revoked, they are encouraged to contact their bank right away to let them know. When unauthorized money transfers are disputed in a timely manner, consumers often have the right to get their money back. Consumers are encouraged to always follow up with a company in writing and keep a copy for their records.

The Federal Deposit Insurance Corporation (FDIC), Federal Trade Commission (FTC), and the Consumer Financial Protection Bureau (CFPB) accept complaints against banks and companies who violate consumers autopay rights. Attorney General Raoul also strongly encourages Illinoisians who believe their autopay rights have not been honored to file a complaint on the Attorney General’s website.

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