Authorization Required for Electronic Funds Transfers

Any “preauthorized” electronic funds transfer must be authorized by the consumer in writing.  A copy of that writing must be provided to the consumer.  However:

  • A “preauthorized electronic funds transfer” is defined as one that is authorized in advance to recur at substantially regular
  • What this means is that a single payment made by way of electronic transfer does NOT have to be authorized in writing.
  • Only regular, interval payments – like a monthly payment arrangement.
  • If the amount of the payment at each interval varies – a different amount may be paid each payment – then the payee shall give written notice to the consumer prior to each payment.

Basically, if you are going to set up a monthly payment arrangement with a creditor that allows the creditor to go take money directly from your checking account, that creditor must get a written authorization from you to do so.  Just recording a telephone conversation is not enough.  Also, if the amount of the payment is going to be different from one month to the next, then you are entitled to advanced written notice of each transfer.