Stop Pays on ACH Pay Day Loan Payments

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Question:

We have several customers who are getting payday loans from these companies. Then they come to our bank the next month and make a stop payment request for any ACH amount from ABC Company. We are charging them a one time fee. This is taking up a lot of our time in processing. I know we can close their account out after giving them 30 days notice. Can we charge them every time an ACH item hits from that same company? Some of these customer have 4 or 5 payday loan companies they are borrowing from. Do we also need to have them sign an ACH stop payment form stating they have notified the payday company to revoke the ACH coming out of their account?

Answer:

Unless state law gets in the way, you can charge customers for things for which you have provided them proper disclosures. If your disclosure says you'll charge a stop payment fee of $XX.XX, that's all you can charge unless you also say that you'll charge for multiple presentments, or for return of stopped ACH items.

If the consumer also signs a statement or provides other documentation that the consumer has revoked the authorization given earlier to the Payday Lender, you are obliged to return all future ACH debits from that Originator (see the OSC to Section 205.10 of Regulation E).

As for closing the accounts, that is a determination your bank will need to make. It's apparent that you're unlikely to be making any profit on such an account.

First published on BankersOnline.com 07/18/05