Cancelling/ Revoking Automatic Debit Payments

What is an automatic debit payment?

An automatic Debit Payment is when you allow a merchant (the business providing the goods or services to you) to debit (take money from) your (credit card,cheque or savings account) account on a regular basis to pay for goods and services.

How does an automatic debit payment work?

  1. You agree to pay by Automatic Debit Payment for goods or services, for example, your electricity bills or gym membership
  2. You sign an agreement which authorizes the merchant to deduct payments from your credit card account by Automatic Debit Payment
  3. Money will be taken from your account until you cancel the Automatic Debit Payment.
  4. There are different types of Automatic Debit Payments.

Cancelling an automatic debit payment

You can cancel an Automatic Debit Payment whenever you want. You do not need a reason. To cancel a Automatic Debit Payment you must write a letter to the merchant and send a copy of that letter to your bank or credit union.

1. Even if you stop the Automatic Debit Payment you may still owe money to the merchant for goods and services provided. 2. If your contract with the merchant states that it is a condition you pay by Automatic Debit Payment you should get legal advice before stopping the Automatic Debit Payment.

You should cancel your Automatic Debit Payment when:

  • You have cancelled your agreement with the merchant for any reason
  • You wish to change your payment method
  • You are in dispute with the merchant as to the amount of a bill or the quality of the goods or service. Once the Automatic Debit Payment has been cancelled you should still pay any amount you agree you owe.

How to cancel pre-authorized debit?

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.

You will need to notify your bank at least three business days before the scheduled date of the transfer and inform it that you wish to stop payment. You can provide the notice orally, but the bank will require you to confirm the request in writing. The bank will provide you the address where the confirmation should be sent. The oral request ceases to be effective after 14 days if the bank requests a written confirmation and the written notice is not received.

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

  • Contact the merchant directly and revoke your authorization to charge your account. It may be best to provide the notification in writing. Click here for sample letter
  • Keep a copy of your notice revoking authorization to charge or obtain a cancellation number; and
  • Notify the bank that the merchant no longer has authority to debit your account. It may be best to provide the notification in writing. Be prepared to include a copy of your revocation to the company with your written stop-payment order. Click here for sample letter

What do I do if the automatic debit payment is not cancelled?

If you have revoked authorization and the merchant continues to charge the account, you can dispute the transactions with the bank. Write a letter of complaint to your bank or credit union immediately (preferably before the due date for payment or 30 days from the date of the statement). If you wait longer, you could have to pay the full amount of any transactions that occurred after the 30-day period and before you notify your bank. In order to hold you responsible for those transactions, your bank would have to show that if you notified them before the end of the 30-day period, the transactions would not have occurred.

In extenuating circumstances, like lengthy travel or hospitalization that keeps you from notifying the bank within the time allowed, the notification periods above must be extended.

If the debit is unauthorized, (that is, made after you had cancelled the Automatic Debit Payment Authority), then you should ask that any amounts debited after the cancellation be credited to your account (paid back) along with any fees or interest that should not have been charged. Click here for sample letter

What does the bank have to do once I report it? Can I get my money back?

Once you notify your bank or credit union, it generally has ten business days to investigate the issue (20 business days if the account has been open less than 30 days). The bank or credit union must correct an error within one business day after determining that an error has occurred. Your bank or credit union then has three business days to report its findings to you.

If the bank or credit union can’t complete its investigation within ten (or 20) business days as applicable, it must generally issue a temporary credit to your account for the amount of the disputed transaction, minus a maximum of $50, while it continues to investigate.

In certain circumstances, however, it does not have to issue a temporary credit. For example, the bank or credit union may require you to provide written confirmation of the error if you initially provided the information by telephone. If you are asked to follow up in writing and you do not do so within ten business days, the bank or credit union is not required to temporarily credit your account during the course of its investigation.

The bank or credit union must then resolve the issue in 45 days, unless the disputed transactions were conducted in a foreign country, were conducted within 30 days of account opening, or were debit card point-of-sale purchases. In those cases, you may have to wait as long as 90 days for the issue to be fully resolved.

If the bank or credit union determines that the transactions were in fact authorized, it must provide you with written notice before taking the money that was credited to you during the investigation out of your account.