Know How to Properly Cancel Recurring Payments and Which Legal Protections Exist for You
It's usually easy to cancel automatic payments, but there are protections for you and things you can do if you have trouble or get drafted anyway
Recurring billing is great for our often busy schedules. But preferences sometimes change and you no longer wish to have a payment drafted automatically. So before you sign up for automatic payments, you should know how to properly cancel them, how to deal with cancellation problems should they arise, and know which laws exist to provide you with protections in case you are unable to cancel them.
companies that automatically bill you before your next shipment
The Restore Online Shoppers' Confidence Act (ROSCA) governs companies that engage in "negative-option marketing," which is the practice of automatically billing you for the next shipment unless you opt out within a certain period of time. These companies are required to do several things:
- They must clearly and conspicuously tell the you about all the terms and conditions that apply to the transaction before they obtain your billing information.
- They must obtain your express informed consent before charging you.
- They must provide simple mechanisms for a you to stop recurring charges.
Retailers who do not follow these requirements are subject to action from the Federal Trade Commission (FTC), including penalties.
The Electronic Fund Transfer Act
Typically the companies you might pay on a recurring basis, such as for magazine subscriptions, newspaper subscriptions, and donations, are governed by the Electronic Fund Transfer Act. This law limits your liability when you do not authorize an electronic funds transfer and provides recourse when the law is violated.
There are many different provisions to this law, but the part we are focusing on here is your protection for unauthorized electronic transfers. Let's say that you have a subscription that is debited automatically from your checking account. You cancel the subscription properly, but the amount is still debited from your account. Let's also say that your account did not have enough money and you incurred an overdraft fee. Because of this law, both the company and your bank will have to make you 'whole' again. The erroneous debit would generally need to be reversed by the company and the bank would need to reverse the overdraft charge.
Tips for cancelling a recurring charge or debit
- Know the specific requirement to cancel.
- Try cancelling online first if the merchant doesn't have specific rules.
- Call the company if you are having trouble or have questions.
- Understand which charges will occur even after you cancel.
- Keep documentation of your cancellation or attempts to cancel.
- Send an email to the company if you run into trouble online.
- Don't forget to cancel the contract, not just the payments.
- Write to the company and your financial institution if you have trouble cancelling.
- Make some phone calls if the company still charged you.
- Dispute the charge if you have made good faith efforts to prevent the transaction.
- File a formal complaint with regulatory agencies.
Depending upon your agreement, you might be required to cancel within a certain time frame or you might need to cancel by following certain procedures. Make sure to read and understand the agreement first to ensure that you follow the merchant's cancellation policy. Don't make any assumptions.
The majority of companies that process automatically recurring charges have easy ways to cancel these charges on their websites. But that usually requires you to log in to your account, so make sure you keep track of your login information. Cancelling may be as easy as a few clicks. This option is great as it allows you to cancel the drafts easily anytime and from any place.
Unfortunately, some automatic payments can't be cancelled online. This can happen frequently with trial subscriptions where you will be charged at the end of the trial. Many companies know that we are less likely to cancel if we have to call to speak to a person.
Sometimes it is easier to cancel recurring payments by calling the company and speaking to someone, especially if the company's website isn't clear or if you can't remember your login information. When calling the company, remember that friendliness and civility get you a lot further than if you are rude. You may even to still be able to cancel the next draft even if you are outside the cancellation window just by speaking to someone and being nice.
When you cancel automatic payments, you generally shouldn't have any more drafts. But it's possible that you might have another one. This can happen if you miss the cutoff date to cancel the current month or if you will be charged a prorated fee for any remaining time. Make sure to take note of which charges will post and verify they are correct.
Make sure that you print any confirmation messages or get a confirmation number from the agent you talk to. Keep in mind that every company does business a little differently. Many companies may not have confirmation numbers for these transactions, but will typically send you an email confirmation. In any case, do not presume that you'll even get a confirmation. So make sure to document the cancellation somehow.
If you have trouble with the cancellation, try again in a little bit. Inadvertent technical issues, either with the company or even with your web browser, can prevent a successful cancellation. In any case, make a detailed note of the time and date of your attempt, as well as the problem you had. If you have an error message on the computer, print it, take a screen shot, or take a picture with your phone. Some people have even recorded video of their attempts to cancel in order to prove they made the attempt.
If you are contacting someone by phone and are in North Carolina, you generally do not need the other party's consent to record it. Most companies disclaim that their calls are recorded, so you may be safe to record these calls yourself. Recording a phone call can give you the proof you need that you cancelled or attempted to cancel.
Sometimes a company's website is having an issue, but no one knows about it. In this case, consider sending an email to the company both alerting them to the problem and requesting a cancellation. The company might still need you to cancel another way, such as by phone, but it starts a document trail for you.
If you have the ability to send a message from within your account, try using that as it is an internal message to the company that is coming from your verified 'logged-in' account. Include in your message that you are trying to cancel an automatic payment (and the subscription or service, if applicable) but that you are running into trouble.
Cancelling payments to a company does not always automatically cancel the contract you may have made. If you are able to cancel automatic drafts for a company, you may still have to cancel a contract. Cable subscriptions and gym memberships are great examples. Just because you tell the company to stop drafting payments doesn't mean you've cancelled the service. The same goes for loans. If you cancel automatic drafts for your car loan, you are still obligated to pay the loan.
When you cancel, make sure that you have cancelled both the automatic payments and the contract or service if you no longer wish to have it.
If you are running into trouble cancelling an automatic payment, write to the company and copy your financial institution. This can be helpful if a company appears unwilling to make the cancellation. Make it clear that you are revoking the authorization to charge you, either permanently or for a specific transaction. Make sure to send your letters with tracking so you can have proof of delivery. Email is a great first step, but you should send letters if you have gotten to this point.
Consider the following sample language to revoke an authorization to charge you:
I am writing to stop automatic payments from my financial institution, which is XXXX, for payments to your company, XXXX. My account number with your company is XXXX. I am writing to inform you that I am revoking authorization for you to debit my account via electronic funds transfer. This revocation applies to the next scheduled debit. I have not revoked authorization for other debits. OR This revocation applies to any and all future debits.
If the charges continue after you have notified the company of your desire to cancel, call both the company and your financial institution. Inadvertent mistakes can and do happen from time to time. Most mistakes can be cleared up this way. Remember to keep things factual and polite.
If you are still charged despite cancelling payments, revoking authorization and attempting to fix the issue, your next step might be to dispute the transaction.
When you dispute a charge, make sure you understand your financial institution's policies on disputes. Depending upon the financial institution, you may only have sixty (60) days from your statement date in which to start your dispute.
When disputing the charge, provide all documentation you have collected, including confirmation numbers and other proof of cancellation. You may be required to provide the original contract if one exists. If you have been running into trouble cancelling the charge, provide detailed information regarding your attempts.
If you run into trouble cancelling your payments and/or service, considering filing an official complaint.
Regulatory agencies are here to help you if a company is not playing by the rules. When disputing billing, you can file a complaint with the Consumer Financial Protection Bureau, the North Carolina Attorney General's Office, and the Federal Trade Commission.