Buyer Beware: Automatic payments can be hard to stop!
More and more people are giving their vendors the right to make automatic deductions from their checking accounts, or make recurring charges to their credit cards.
Most people think that the credit card company will accept an order to stop payment and they do not have to work through the vendor. This is not true.
The credit card company will keep billing you until the vendor tells them to stop, even if you cancel the card! For this reason I usually recommend against this procedure (sometimes you have no choice).
Vendors are not very cooperative when you want to cancel, because they are reluctant to give up the stream of payments that come with automatic debit. “They will make it as difficult as possible,” says Elizabeth Warren, a law professor at Harvard (quoted in the Wall Street Journal - 2/22/06).
AOL was sued for this, and ended up paying $25 million to settle a class action lawsuit against it for failing to allow its customers to cancel their service. You can imagine how frustrating this can be, and calling your credit card company is no help at all.
I know one person who canceled his credit card to stop AOL payments, but the credit card company kept billing him anyway. Took him six months to straighten out the problem.
How to cancel automatic payments.
If you want to cancel your automatic payments, you have to follow the rules. There is a federal law that regulates all of the following:
Checking Account: If your payment is being deducted from your checking account, all you have to do is notify the bank (it’s best to do this is writing, especially by certified mail, return receipt requested) that you want the payments to stop. This must be done at least three days before the next payment is deducted.
You do not have to inform the company getting the money, although I advise sending them a copy of your letter. This might work with debit cards too.
Credit Card. Again, send a certified letter to the company canceling the deduction. Then, if they do not cancel and the charge appears on your account, you will have to take advantage of the credit card companies legal obligation to investigate disputed charges, which must be done in writing. See “How to dispute charges on your credit card”. Send a copy of the certified letter you sent to the vendor with your complaint form. You will have to do this every month until the vendor finally stops billing you.
Debit Card. If you are having automatic deductions from your checking account with a debit card, you do not have the same protection under the law, but the bank may grant you that protection anyway.
I think the best thing to do with an automatic deduction from a debit card is to work both ends. First, send a cancellation notice to the vendor, certified mail, and then enclose a copy of that in a certified letter to the bank that issued the debit card telling them to stop allowing those deductions.