Yes, a payday loan company can access your bank account through what is known as an ACH withdrawal or Automated Clearing House. An ACH withdrawal is tendered by way of your bank’s routing number and your checking account. The payday loan company does not have to physically deposit your post-dated check in order to collect on a cash advance loan. In fact, the majority of payday lenders use ACHs rather than physical check instruments because it allows them to attempt to withdrawal money owed more than once should the account not have sufficient funds.
As mentioned, the post-dated check you gave the payday lender in order to get a cash advance is all that is needed in order to access your bank account. It has your bank’s routing number and your specific account number. That, along with the loan application you filled out gives the payday lender express permission to withdraw funds from your account in order to make good on the loan.
How Many Times can a Payday Loan Company Access My Bank Account?
The answer can be frightening. In theory, a payday lender could attempt a withdraw as many times as it wants until the loan is paid in full. However, many will only try a few times before putting your name into collections. In a typical example, a borrower takes out a $400 payday loan and gives the lender a post-dated check for $480–the principal and interest. When the loan comes due, the borrower must either pay $480 in cash or the lender cashes the post-dated check through an electronic withdrawal. If the check bounces, the bank and lender charge the borrower insufficient fund fees. This can happen two, three, or even more times.
How Do I Stop a Payday Loan Company from Accessing My Bank Account?
The easiest way, of course, is to pay the loan off. But if this isn’t possible, you could put a hold on your bank account. However, that means you won’t be able to use your ATM and/or bank card. Another way to stop automatic withdrawals is to get onto a payday loan consolidation plan. Rather than have to pay back the loan in a lump sum, you’ll be able to make affordable monthly payments and become debt free.