Sunday, November 13, 2011

Collection Agency's Early Bank Withdrawal

Reader Question


I have an issue with a collection agency (FAST) who has called me a criminal, a baby, and a bunch of other things while on the phone with me, as I was setting up a payment plan.  in that payment plan, I made arrangements to pay $100 then, then $230 each 18th in Nov, Dec, and Jan to pay it off.  These were for checks.  Even after paying almost half, they are threatening to have me charged with a felony.  The agent who did the agreement made a mistake and put the payments in for the 4th of each month (which I would never do since that is rent time) instead of the 18th, and refused to fix it when the first payment came out.  I asked to have a copy of the conversation pulled since they announce that they record the calls, and was told that they wouldn't and they "would trust their rep over a criminal."

There is much more to what was going on with their abuse, but I was wanting to find out if they were doing anything illegal by taking money out of my account 2 weeks before they were supposed to.



You aren't the first person to learn the hard way that giving a collection agency your banking information and permission to withdraw payments directly from your account is a very bad idea.  First of all, this was a purposeful "mistake." The most likely scenario is that the debt collector you spoke with scheduled your payment before his monthly cutoff so that he would be sure to get his commission from your payment a month early. It's particularly heinous when you consider that now you are enduring extreme financial stress as a result of the measly $10 or so extra the rep wanted in his pocket this month. 

Lets get one thing straight: You are not committing a felony by not paying. You aren't even committing a crime. They can't have you charged with a felony. The ironic part of that is that just threatening to charge you with a felony is against federal consumer protection laws. 

Let's see what Section 807 of the Fair Debt Collection Practices Act has to say about this, shall we?

FDCPA: Section 807 (4) (7)

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section...

(4) The representation or implication that nonpayment of 
any debt will result in the arrest or imprisonment of 
any person or the seizure, garnishment, attachment, 
or sale of any property or wages of any person unless 
such action is lawful and the debt collector or creditor 
intends to take such action...

(7) The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer. 

Barring all the legalese, that basically states that it is illegal for a collection agency to tell you that you are committing a crime if you aren't. It's also illegal for a collection agency to threaten to take any action against you that it does not have the rock-solid legal right to take. 

Thus, the collection agency could sue you if your debt was still within the statute of limitations (which it is now that you've made a payment) but they can't tell you that you are committing a crime or threaten to "have you charged" with a crime. The only real crime here is the clear disregard this company has for federal law. 

Unfortunately, unless you wrote down the date and time of the call and who you spoke with, your odds of proving that this FDCPA violation occurred are slim. Unless, of course, it happens on a regular basis in which case I highly recommend "collector baiting." But you'll get your chance to do that (hopefully) after you remedy the current situation.

The first step you need to take is to make an appointment to speak with someone at your bank in a power position. Basically, anyone who isn't a teller. Explain that a company is withdrawing payments from your account without your permission. You have done all you can to get this problem remedied through the company with no results.  Tell the bank that these withdrawals are unauthorized and ask that it block all automatic withdrawals without your prior approval. Don't be surprised if your bank won't do this. It's much easier for a bank to just pay out whatever merchants ask and then pursue you for payment. Some banks, however, will try to help you – especially if you are a long-standing, good customer. 

The bigger the bank, the less likely they are to help. For this reason I sincerely hope that you're not banking with Bank of America or Wells Fargo or some place like that. 

If the bank won't block all automatic withdrawals, you want to close your bank account and open a new one. Now, and this is important, make sure that if you close your account the bank will block the payments and not withdraw them from your new account, pay them and then send you a bill,  or re-open your old account, charge them to your account, and then charge you an NSF fee for the "service." Get this in writing if you can do so without looking like a jerk. 

If you really want to be on the safe side and your credit's okay, open your new account at a completely different bank. In the event the company ever tries to gutter-sue you and garnish your bank accounts, having an account at a totally different bank makes you that much harder to find. Closing your bank account and opening up a new one is a big hassle, but its something that's often necessary when you've got collectors who have your banking information. 

Here comes the bad news: some banks won't play ball. They'll let you close your account, sure, but they're still going to pay out the collection agency's early claim and then pursue you for each claim they had to pay (plus fees). According to these banks, its the customer's responsibility to notify creditors of a change in banking information. In reality, its just another excuse to charge fees. 

Collection agencies cannot legally withdraw money from your bank account without your permission unless they have a judgment against you or have your permission.  Once they have your permission, watch out! Personally, I'm surprised that a company unscrupulous enough to call you a criminal didn't just withdraw the entire balance you owed right then and there. 

Start documenting debt collectors' behavior immediately. After you navigate the piles of red tape at your bank to prevent this early withdrawal from happening again, file a lawsuit against the company for its oh-so-stunning FDCPA violations and get your money back  :)


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