Monthly Archives: November 2015

You have protections when it comes to automatic debit payments from your account

People use automatic payments set up with a merchant or other service provider to pay bills and other recurring payments from their bank or credit union accounts. This could be for utility bills, credit card bills, monthly fees for childcare, gym fees, car payments, or even a mortgage. Such automatic payments can be a convenient way for people to make sure they pay their bills on time. Some lenders offer an interest rate reduction on loans for paying by automatic debit. However, consumers have told us that in certain cases, they have had trouble stopping automatic payments after providing a company with their bank account number.

Therefore, before you give anyone your bank account number and permission to automatically withdraw money from your bank account on a regular basis, it’s good to know how automatic debits work, what to be careful about, and how to stop the automatic payments if you cancel the service or just change your mind about how you want to pay.

How do automatic debit payments work?

You have choices about how to pay your bills. Some of your choices are to pay by check or to pay electronically. Most banks provide online or mobile bill payment services that let you schedule and send payments through your bank, either on a one-time or recurring basis. Another electronic payment option is to give permission directly to a company, such as a merchant or lender, to take payments from your bank account on a recurring basis. We’ll call these automatic debit payments. Let’s take a closer look at this last form of electronic payments.

To set up automatic debits directly with a company, such as a student loan or mortgage servicer or even a gym, you give the company your checking account or debit card information and give them permission (“authorization”), in advance, to:

  • electronically withdraw money from your account;
  • on a recurring basis, usually at regular intervals like every month.

You can set up automatic debit payments to pay the same amount each time, or you can allow payments that vary in amount within a specified range – for example, for your utility bill that changes each month. The company should let you know at least 10 days before a scheduled payment if the payment will be different from the authorized amount or range, or the amount of the most recent payment.

How are automatic debit payments different from bill-pay?

Automatic debit payments work differently than the recurring bill-pay feature offered by your bank. For recurring bill-pay, you give permission to your bank to send payments to the company. With automatic debits, you give your permission to the company to take the payments from your bank account.

Be cautious about giving anyone your bank account information and authorization

Automatic payments can help you stay on track with bills and other regular payments. However, be careful about giving a company permission to take payments directly from your account.

Before you give a company permission to make automatic withdrawals:

  • Verify the company. Before agreeing to let a company automatically take money out of your bank account, make sure the company is legitimate and credible. Consider using a different payment method until you’re sure you’re happy with the company or service. Never give your bank account or debit card information to a company that you’re at all unsure about.
  • Know your rights. A company cannot require you to repay a loan by automatic debit from your checking account as a condition for giving you a loan (unless the loan is an overdraft line of credit). Be wary of a company that pressures you to repay by automatic debit.
  • Be careful about overdraft and insufficient funds (NSF) fees. Automatic payments can help you avoid late fees on your bills. But if you forget to track your account balance and it’s too low when an automatic (or other) payment is due, you might have to pay overdraft or NSF fees. Both the bank and the company might charge you a fee if there is not enough in your account. These fees can add up quickly. Pay close attention to your bank account balance and upcoming automatic payments to make sure there will be enough money in your account when the payment is scheduled.
  • Review the terms of your agreement for the automatic payment. The company must give you a copy of the terms of your payment authorization. The payment authorization is your agreement to allow the company to debit your bank account for payment. The terms of your authorization must be laid out in a clear and understandable way. It’s important to review the copy of your authorization and keep a copy for your records. Make sure you understand how much and how often money will be taken out of your account. Monitor your account to make sure the amount and timing of the transfers are what you agreed to.

You have protections – including the right to stop automatic payments

Federal law provides certain protections for recurring automatic payments. You have the right to stop a company from taking automatic payments from your bank account, even if you previously allowed the payments. For example, you may decide to cancel your membership or service with the company, or you might decide to pay a different way.

If you decide you want to stop automatic debit payments from your account:

  1. Call and write the company. Tell the company that you are taking away your permission for the company to take automatic payments out of your bank account. This is called “revoking authorization.” Click here for a sample letter.
  2. Call and write your bank or credit union. Tell your bank that you have “revoked authorization” for the company to take automatic payments from your account. Click here for a sample letter. Some banks and credit unions may offer you an online form.
  3. Even if you have not revoked your authorization with the company, you can stop an automatic payment from being charged to your account by giving your bank a “stop payment order.” This instructs your bank to stop allowing the company to take payments from your account. Click here for a sample “stop payment order.”
    1. To stop the next scheduled payment, give your bank the stop payment order at least three business days before the payment is scheduled. You can give the order in person, over the phone or in writing.
    2. To stop future payments, you might have to send your bank the stop payment order in writing. If your bank asks for a written order, make sure to provide it within 14 days of your oral notification.
    3. Be prepared to include a copy of your revocation to the company (see step 1) with your written stop-payment order.
  • Monitor your accounts. Tell your bank right away if you see a payment that you did not allow (authorize), or a payment that was made after you revoked authorization. Federal law gives you the right to dispute and get your money back for any unauthorized transfers from your account as long as you tell your bank in time. Click here for a sample letter.

Be aware that banks commonly charge a fee for a stop payment order. Further, cancelling your automatic payment does not cancel your contract with the company. If you want to cancel a contract for a service, like cable or a gym, be sure to cancel your contract with the company as well as telling it to stop automatic payments. If you cancel an automatic payment on a loan, you still have to make payments on that loan.

We want to know about your experiences, good or bad, with using and with cancelling automatic payments – leave a comment on the blog below.

If you’re having a problem with a bank account or service, submit a complaint to the CFPB at or call (855) 411-2372.

Have questions about consumer financial products and services? Find answers at .

This post was originally published on the Consumer Finance Protection Bureau's blog. Link: Author: Gail Hillebrand and Davida Farrar

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Fall 2015 rulemaking agenda

An important part of the CFPB’s mandate from Congress is to make rules governing consumer finance markets more effective and to create new rules when warranted. Today, we’re posting a semiannual update of our rulemaking agenda as part of the federal government’s Unified Agenda of Regulatory and Deregulatory Actions.

Under the Regulatory Flexibility Act, federal agencies must publish regulatory agendas twice a year. We’ve been voluntarily participating in the Unified Agenda. The Office of Management and Budget leads this effort. The Unified Agenda is available in full online, and portions will also be published in the Federal Register. The agenda includes rulemaking actions in pre-rule, proposed rule, final rule, long-term, and completed stages.

Here’s an overview of our major current and long-term initiatives.

Current initiatives


Arbitration clauses in many contracts for consumer financial products and services require consumers and financial institutions to resolve any disputes that may arise between them through a private arbitration process, instead of going to court. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) banned such arbitration clauses in contracts for mortgage loans and directed the Bureau to study the use of agreements providing for arbitration in connection with consumer financial products or services. This past March, we sent Congress the report summarizing our three-year study, which was the most comprehensive analysis of consumer finance arbitration ever performed and expanded on preliminary results that we had released in December 2013.

We’re now beginning a rulemaking process to address concerns related to the use of arbitration agreements in connection with credit cards, deposit accounts, payday loans and various other consumer financial products or services. In particular, we are considering whether to propose rules that would prevent companies from using these agreements to foreclose consumers’ ability to bring class action lawsuits, which can provide consumers with substantial relief and create the leverage to bring about changes in business practices. To help monitor the fairness of arbitration proceedings, we are also considering whether to propose requiring that arbitration filings and awards be submitted to the Bureau. These ideas are summarized in an outline that we recently released for purposes of consulting with representatives of small businesses that might be affected by the rulemaking, using a process outlined in the Small Business Regulatory Enforcement Fairness Act.

Payday, auto title, and similar lending products

The Bureau is in the process of developing a Notice of Proposed Rulemaking to address concerns in markets for payday, auto title, and similar lending products. The Bureau is particularly concerned that lenders are offering these products without assessing the consumer’s ability to repay, thereby forcing consumers to choose between reborrowing, defaulting, or falling behind on other obligations. We are also concerned about certain payment collection practices that can subject consumers to substantial fees and increase risk of account closure.

The Notice of Proposed Rulemaking will build on feedback we have received from small businesses and other stakeholders after releasing an outline of proposals under consideration last spring for purposes of the Small Business Regulatory Enforcement Fairness Act process. The Bureau will also publish results of further research it has been conducting into these markets in connection with the rulemaking proposal. The Bureau previously released a white paper and a report summarizing some of its research on some of these products. We expect to release the rulemaking proposal in first quarter 2016.

Prepaid accounts

General purpose reloadable cards and other similar prepaid products are increasingly being used by consumers in place of traditional checking accounts or credit cards, but they do not always carry important consumer protections. To address this issue, we’re finalizing a proposed rule that we published in the Federal Register in December 2014. We proposed that prepaid accounts receive certain protections that are similar to those that exist now for debit and payroll cards. We also proposed general credit card protections to prepaid accounts that access overdraft services or offer certain credit features. We expect to issue the final rule in spring 2016.


The Bureau is preparing for a rulemaking concerning overdraft programs on checking accounts. A prior white paper and report by the Bureau highlighted a number of possible consumer protection concerns, including how consumers consent (or “opt in”) to overdraft coverage for certain electronic transactions, overdraft coverage limits, transaction posting order practices, overdraft and insufficient funds fee structures, and involuntary account closures. Regulations that took effect in 2010 require that consumers opt in before banks can charge overdraft fees for ATM and one-time debit card transactions, but opt in rates vary widely. In preparation for the rulemaking, the Bureau is conducting additional research and has begun consumer testing initiatives related to the opt in process.

Debt collection

The Bureau is also conducting research for a rulemaking on debt collection activities, which are the single largest source of complaints to the federal government of any industry. Building on a previous Advance Notice of Proposed Rulemaking, the Bureau is now analyzing the results of a groundbreaking nationwide survey related to consumers’ experiences with debt collection. We’re also engaged in consumer testing initiatives to determine what information would be useful for consumers to have about debt collection and their debts and how that information should be provided to them.

Larger participants and non-depository lender registration

The Dodd-Frank Act allows the Bureau to supervise nonbank financial services providers that are designated as “larger participants” in their particular markets for consumer financial products and services. We’ve already defined larger participants in several markets, including most recently the market for auto lending and leasing. The Bureau expects next to develop rules to define larger participants in markets for consumer installment loans and vehicle title loans. We also expect to consider whether rules to require registration of lenders in these markets or other non-depository lenders would facilitate the Bureau’s supervision of such entities.

Women-owned, minority-owned, and small businesses data collection

The Dodd-Frank Act requires the Bureau to develop rules to implement a requirement that financial institutions report information about lending to women-owned, minority-owned, and small businesses. The Bureau is beginning work on this project, building off a rule that it released this fall to revise a similar regime for reporting data about home mortgage lending. The first stage of our work will focus on outreach and research. We then plan to begin developing proposed rules concerning the data to be collected and appropriate procedures, information safeguards, and privacy protections for information-gathering.

Mortgage servicing

The Bureau is working to finalize a proposal we published in December 2014 to amend certain aspects of the Bureau’s 2013 mortgage servicing rules. The proposal addressed, among other things, enhanced loss mitigation requirements and compliance with certain rules when the borrower is a potential or confirmed successor in interest or is in bankruptcy. We have been conducting testing of periodic statements for consumers in bankruptcy and are working to develop the final rule for issuance in mid-2016.

Implementation of the Home Mortgage Disclosure Act, Know Before You Owe disclosures, and other mortgage rules

The Bureau is working to support implementation of multiple mortgage rules required by the Dodd-Frank Act. Most recently, in October 2015, we issued a final rule amending Regulation C to implement amendments to the Home Mortgage Disclosure Act made by the Dodd-Frank Act, among other things. The final rule adds new reporting requirements, clarifies several existing requirements, modifies the institutional and transactional coverage of Regulation C and the processes for reporting and disclosing data, and provides extensive compliance guidance. The Bureau is preparing a compliance guide and other support materials and programs to prepare for implementation of various parts of the rule starting in 2017 and 2018.

We are also continuing to support implementation of new rules that took effect in October 2015 requiring provision of Know Before You Owe disclosures to applicants for mortgage loans. The disclosure forms streamline and integrate information that lenders are required to provide consumers under the Truth in Lending Act and Real Estate Settlement Procedures Act. We’ve provided guides and materials to help industry and consumers prepare for the changes.

The Bureau is also continuing to support the implementation of various other mortgage-related final rules we issued in January 2013 to implement Dodd-Frank Act reforms and strengthen consumer protections involving mortgage origination and servicing. Among other efforts, we’re monitoring the market and continuing to issue clarifications and amendments as warranted. Most recently, we issued a final rule in September 2015 modifying certain requirements for small creditors that operate predominantly in “rural or underserved” areas.

Long-term actions

The Bureau has also updated a portion of the Unified Agenda focusing on long-term actions to reflect potential initiatives beyond November 2016. These include potential rulemakings to address important issues related to credit reporting and student loan servicing.

Credit reporting

Information in credit reports can be critical to determine a consumer’s eligibility for credit, access to checking accounts, employment, rental housing, and more. The Bureau is monitoring the market through its supervisory, enforcement, and research efforts, including a white paper we published in December 2012 and other agency reports on credit report accuracy. As this work continues, the Bureau will evaluate possible policy responses to issues identified, including potential additional rules or amendments to existing rules governing consumer reporting. Potential topics for consideration might include the accuracy of credit reports, including the processes for resolving consumer disputes, or other issues.

Student loan servicing

Student loan servicers are a critical link between borrowers and lenders, yet there are no consistent, market-wide federal standards for student loan servicing. In September 2015, we released a report that identifies issues and suggests a framework to improve student loan servicing. The Bureau has made it a priority to take action against companies that are engaging in illegal servicing practices , and that ongoing work includes addressing many of the problems outlined in this report. Also in September, the Bureau, the Department of Education, and the Department of the Treasury issued a Joint Statement of Principles on Student Loan Servicing , proposing a framework similar to the recommendations included in this report. We will continue to monitor the market for trends and developments and evaluate possible policy responses, including potentially proposing rules. Possible topics for consideration might include specific acts or practices and consumer disclosures.

The Bureau is continuing research, analysis, and outreach on a number of other consumer financial services markets, and we’ll update our next semiannual agenda in the spring.

This post was originally published on the Consumer Finance Protection Bureau's blog. Link: Author: Kelly Cochran

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5 things to consider before you collect your Social Security benefits

If you’re approaching retirement, you’re probably thinking about when to start collecting your Social Security retirement benefits.

To help you make a more informed decision about when to claim, we created a new tool called “Planning for Retirement”. You’ll see how your claiming age affects your benefits and get tips relevant to your situation, which can help you start the conversation about your retirement needs and goals. We encourage you to try it out!

In addition to using the tool, consider these five tips to help you plan ahead and make the best decision for yourself and your family:

1. Know your “full retirement age”

The age at which you get your full retirement benefits from Social Security ranges from 66 to 67 depending on the year you were born. Claiming before your full retirement age leads to a permanent decrease in monthly benefits, while claiming after leads to a permanent increase. The full retirement age is the age at which you can start working and collecting simultaneously without facing a reduction in benefits.

Did you know? One recent survey found that seven in ten consumers believe that 65 is their full retirement age. In fact, the full retirement age actually varies depending on the year in which they were born.

2. Don’t claim early if you don’t have to.

Allowing your benefits to grow for one year makes a difference in your benefits. You’ll get an additional five to eight percent in monthly benefits for every year you wait to claim after age 62, maxing out at age 70. A higher monthly benefit could be important when you are older, which is when Social Security may play a more central role in your retirement income. At that point, your other sources of income and savings may be depleted and your health-related costs may be higher.

Did you know? You could see as much as a 30 percent reduction in monthly benefits by claiming before your full retirement age; whereas you can get as much as a 32 percent permanent increase (8 percent per year) by claiming after your full retirement age – up to age 70.

3. Know your retirement budget

Start with a simple budget that accounts for your income and expenses. Consider both your actual income and expenses before retirement and your expected income and expenses after you retire. This can help you understand how a reduced or increased benefit will affect your ability to meet your needs in retirement. In addition, this kind of budgeting can help you decide if you should reduce your expenses and pay off any debts before retiring.

Did you know? Retirement years may be more expensive than retirees expect, as many will incur increased health and housing expenses in their later years, and many carry mortgages and other debts into retirement.

4. Keep working if you can

Staying in the workforce – full or part time – for even one or two additional years can earn you an even bigger increase in your Social Security benefit by replacing years with low or no earnings from your earnings record. Working longer also gives you more time to save for retirement.

Did you know? Many people (46%) believe that their benefits are based on how long they work as well as their pay during only the last five years of employment, when in fact they are based on their highest 35 years of earnings.

5. Consider your spouse’s long-term needs

Your decision of when to claim your Social Security benefits could affect the benefits your spouse will receive after you die. Because surviving spouses receive the higher of the two spouses’ benefits, it often makes sense for higher earning spouses to claim at or after their full retirement age to get their full or highest possible benefit. This can minimize the reduction in income a surviving spouse may experience. Talk to your spouse about your claiming options so you can make this important decision together.

Did you know? On average, a married couple reaching age 65 can expect that one spouse will outlive the other for about 10 years or more.

Do you need more information to help you decide when to claim Social Security? Before you claim, check out “Planning for Retirement”:

To get more facts about Social Security, check out our factsheet.

The Retirement Tool is also available in Spanish

This post was originally published on the Consumer Finance Protection Bureau's blog. Link: Author: Stacy Canan and Hector Ortiz

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Before you claim Social Security, explore our new Planning for Retirement tool

There is a good chance that you or someone you know may benefit from our new “Planning for Retirement” tool, which we created to help consumers approaching retirement make an informed decision about when to claim their Social Security benefits.

Here are three reasons why you should check out “Planning for Retirement”.

1. See how the age at which you claim affects your Social Security retirement benefits

Over one-third of consumers claim their benefits at age 62, but your monthly payments can increase by as much as 75% if you wait and claim at age 70 instead of 62.

See your estimated benefits on an interactive graph and find out how to increase them.

If your expected monthly benefit at age 62 is $750, your expected monthly benefit at age 70 is $1320. Source: Social Security Administration

2. Make a better decision with information relevant to your situation

Everyone’s situation is different. Whether you’re married, planning on working in your 60s, or whether you have retirement savings can influence your decision of when to begin claiming your Social Security benefits. After using “Planning for Retirement,” we hope you’ll be able to make a more informed decision based on your situation.

3. Start the conversation about retirement and take action

Whether you find it easy or difficult to talk about money with your family, we provide a tool that can help you begin this conversation and think about the factors that matter when making this decision. It also shows simple action steps that will help you in your retirement planning journey.

Ready to get started? Check out “Planning for Retirement” today:

And if you enjoy it, please share it!

For more about the importance of Social Security’s claiming age for your financial security, see our issue brief.

The Retirement Tool is also available in Spanish

This post was originally published on the Consumer Finance Protection Bureau's blog. Link: Author: Gene Koo

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Live from Brookings Institution in D.C.: Helping America Plan for Retirement

Today, we held a joint event with Brookings Institution and Social Security Administration about planning for retirement.

The event featured remarks from CFPB Director Richard Cordray and Social Security Acting Commissioner Carolyn W. Colvin.

Join the conversation on Twitter at #Retirement.

This post was originally published on the Consumer Finance Protection Bureau's blog. Link: Author: CFPB Web Team

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