Allowing creditor access to bank account for automatic withdrawal

[GRITSinMS]

Has anyone else been caught up in a bad situation where you have allowed a creditor (who has obviously harrassed you) to have access to your bank account to set up automatic drafts for monthly paments?

My husband, against my wishes and advice, allowed the student loan sharks to draft the bank account (thank goodness I kept my own separate one) and they have taken about twice the agreed on amount. Now, of course there are NSF fees to deal with. Not to mention the aspect of getting the draft stop and keep those sharks at bay.

Any advice?

[InDebtInDC]

Read the automatic debit agreement. If they have violated the agreement then take it up with your bank. I would contact the lender as well.

[Caoineag]

Oh dear, I have heard of people closing their accounts to deny access to someone like this. Reputable companies do not take out more than the agreed upon amount because of the amount of trouble they can get into. Make sure you have something in writing. If he just said yes over the phone, you are probably going to have really big issues.

[Snodog]

There's not much you can do except close your account and never give out your account info to these sharks ever again.

[loanstar]

Originally Posted by Snodog

There's not much you can do except close your account and never give out your account info to these sharks ever again.

Closing the account isn't necessary, you can go into the bank and ask them to stop the payments..

[poundwise]

It is one thing to set up automatically drafted payments, such as with your insurance company or gym, etc. That is usually quite safe and typically comes with very little risk of problematic issues.

It is quite another to give a collector this kind of authorization. In short, never do it. Some collectors will beat you over the head saying that they have to do it this way and you must comply. Don't do it.

I do agree, however, that most banks will let you block the authorization without closing the account; however, some banks either don't allow this (you either have to block all such transactions or none) or are fairly incompetent themselves, so sometimes closing the account is the only way to be sure. Check with your bank.

[GRITSinMS]

Unfortunately, my husband is apparently with one of those incompetent banks,as he did request a stop payment on that transaction before it occurred, they even confirmed the stop payment request, but let the payment through anyway, and then say they don't know if they can get the money back.

In the meantime, Yes - I told him not to let the student loan creditor sharks have access to the account like that - and you are so right - they really threatened him. In the case of a student loan, you don't really know where you stand - since the are not "bankruptable" they are almost in a different catagory and you aren't sure of their power.

I would advise any college student reading this forum NOT to get one though - run - run away from the student loan - as fast as you can.

[Joan.of.the.Arch]

I once had a regular bill that I had to pay that way. I opened a separate account at a separate bank and deposited each month just enough money to cover that bill for one month. It was not a bill I was past due on; I was paying as services were rendered. The bank actually did mess it up one month and I closed that account, immediately re-opening another. It was the best way to handle it due to the bank's own inexpilcable cumbersomeness and inability to quickly repair their own screw up.

I disagree that one needs to run from student loans. Student loans still have some of the best terms available on any kind of credit. And student loans can fund a person's ability to pull themselves up a long way in life.

Would you mind sharing the name of the creditor that is going outside the contract and robbing your bank account? Is it the original lender, or a subsequent owner of the account? Were they difficult to deal with before it came to this?

[GRITSinMS]

That is a good idea - opening a separate account especially for a certain bill to be drafted. However, I would prefer to initiate payment.

Maybe I should rephrase the rant about the student loan. I think there are things people don't realize when they sign up for one. Did you know if it goes to collection, they can add 25% in fees? When you are talking thousands of dollars, that is a big increase. No one expects financial difficulties, getting behind on bills, or going into default. But, life happens. With the abudance of scholarships available, I would encourage anyone to explore all the possibilities before going the loan route.

In my case the shark creditor is NCO Financial Systems. No, they were not reasonable or willing to work with us from the start. They threatened garnishment in the first conversation and demanded no less than a certain amount of payment, whether we agreed or not. It is my husband's loan. They have added an enormous amount of collection fees. It seems like if they would be more reasonable, they would get better results.

[Caoineag]

Actually, you would probably be better off with a garnishment then what they did do. The court system has limits to which they will allow a garnishment to impact a person's pay.

Student loans can be scary because you can never escape from them. Its one of the reasons why I was unwilling to consolidate with anyone other than a government agency. If I have a financial hardship, they must defer payment without adding fees, private lenders are not required to assist you like that at all.

In fact, the really scary ones are private student loans. They can have rates higher than credit cards, lack the government's safety features (deferment, forgiveness in trade for work, etc) and they have just as much rights as the government in collecting that amount (no bankruptcy, can garnish wages, etc)