Why Use Direct Payment?
Consumers and companies both benefit from direct payment. As a consumer, you'll save time preparing payments, save money on postage and check fees, improve your budgeting, eliminate the chance of a late payment and save time balancing your bank statement. Companies benefit by processing payments more efficiently and crediting them to your account quicker. In some cases, companies can even reduce their operating costs.

What do I need to know about Direct Payment?
This information is designed to help you understand your rights when you authorize a direct payment. The information includes a list of questions commonly asked by consumers who, like you, are considering using direct payment. The answers to these questions outline your rights, along with the responsibilities of companies and banks involved in these electronic transactions. The glossary below defines common terms.

Account:
Refers to your checking or savings account. Some banks will only allow you to have direct payments withdrawn from a checking account.

Bank:
Refers generically to any financial institution, including a credit union or savings and loan association.

Company:
Refers to a company or charitable/nonprofit organization that you authorize to collect a predetermined amount from your account to pay a bill or donation/pledge.

Payment:
Refers to a recurring (monthly, quarterly or annual) bill or donation-pledge. Some payments are for constant amounts (e.g. mortgage and car loan payments, annual alumni dues, cable subscriptions), whereas some vary in amount (e.g. telephone, gas, electronic and water bills).

 

Frequently Asked Questions

How do I get started and sign up for Direct Payment?
It's easy. If a company offers you a direct payment option, all you need to do is provide them with a written authorization to collect money from your account to cover the cost of a payment. You may also be asked to provide a voided check from the bank account. Many companies will provide you with an authorization form for you to sign and return. TIP: Keep a copy of the written authorization for your records.

How are my bills/donations paid?
On the predetermined due date, the company's bank will instruct your bank to deduct the amount due from your account. The bank then withdraws that amount and forwards it electronically to the company's bank for credit to their accounts.

How can I be sure a payment was deducted from my account?
The payment will be shown on your monthly account statement from the bank. The statement will indicate the payment date and amount, and the company that received the payment.

Will I receive a payment notice from the company each month?
If the payment amount varies or changes, the company or your bank must mail you, at least 10 days before the scheduled payment date, a written notice of the new amount and the date of payment.

Can I stop a payment?
Yes, simply notify the bank, orally or in writing, up to three business days before the scheduled payment date. If you call the bank, you may also be required to provide a written request within 14 days. Some banks may charge a fee for each stop-payment. As a courtesy, you may want to inform the company that you are stopping a payment.

What if the amount on the payment notice from the company is incorrect?
Contact the company immediately. If the company verifies the amount, and you still feel it is incorrect, call your bank to stop the payment before it's posted to your account.

What if there is a discrepancy between my bank account statement and the payment notice I received from the company?
Notify the bank immediately. You have up to 60 days from your account statement date to notify the bank in person, by telephone or in writing of an unauthorized payment or an incorrect payment amount. If you notify the bank in person or by telephone, you may also be required to provide a written confirmation within 10 days. If you notify the bank within the 60-day time period, you should receive credit for any unauthorized or incorrect payments. If the bank needs more than 10 business days to investigate and resolve a matter, it must return the amount in question to your account during the investigation.

How do I discontinue my Direct Payment arrangements with a company?
You must send a written request to the company if you no longer want to pay your bill/donation with direct payment.

With Direct Payment, can the company obtain confidential information about me?
No. The only information available to the company is on the authorization form you signed to begin direct payment. Companies do not have access to your account balance or any other information about you maintained by your bank.

The above questions and answers are based on the Federal Reserve Bank's Regulation E, which governs electronic fund transfers. Some transactions, including wire transfers and the sale and purchase of securities and commodities, are not covered under Regulation E.