In a Nov. 23 alert, the CFPB reminded companies they must obtain authorization before automatically debiting a consumer's account.
Additionally, the CFPB reminded companies they are required by law to provide notifications to consumers that clearly describe the terms of preauthorized automatic debits. Further, the agency said it published action letters that consumers may use to revoke a company's authorization to automatically debit their accounts.
"This bulletin makes clear that companies must get a consumer's authorization before automatically debiting their account," CFPB Director Richard Cordray said. "Consumers also have the right to stop these charges at any time. They can use our action letters or submit a complaint to the bureau if they are having problems managing or stopping auto debits."
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The agency said consumers, under federal law, have the right to have automatic account debits made, but may have trouble stopping the automatic charges. Action letters provided by the bureau include sample letters to both the merchant to stop the automatic payment and the financial institution to provide notice that the authorization has been revoked by the consumer.
The CFPB provided tips for consumers on what to do before providing automatic withdrawal permission to a company, including: Verify the company, watch for overdraft fees, be wary of a company that pressures repayment by automatic debit, and monitor accounts for unauthorized payments or transfers.
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