Can My Credit Card Company Take Money From My Bank Accounts?
The short answer is no, your credit card company cannot take money out of your account without your permission or a judicial order. If you live in Ohio and your credit card company is taking money out of your account without your permission, call our consumer attorneys at (614) 944-5219.
The Electronic Funds Transfers Act (EFTA) in the Consumer Credit Protection Act (CCPA), codified at 15 USC 1693a, et seq., governs electronic fund transfers to and from accounts. It’s a very short Act, with the juicy provisions located towards the end of the chapter.
In particular, 15 USC §§ 1693e requires any preauthorization to be in writing to be valid. So, the credit card company can’t take money from your account unless you allow them to do so in writing. The only exception to this is when you authorize them over the phone for a one time debit to your account, as those transactions fall outside the act under 1693(a)(6)(E).
If you don’t give the credit card company authorization over the phone, then they can’t take your money unless they get your permission in writing (or have a court order). You cannot waive this written requirement, as stated in 1693l. Also, the credit card cannot condition the extension of credit on repayment by electronic transfer, as stated in 1693k.
The civil liability provisions of the act are located in 1963m. It provides for actual damages or up to $1,000, plus attorneys fees in a successful action. Because attorneys fees are provided under the statute, our firm may be able to represent you without out of pocket cost to you. Further, a party knowingly and willfully violating the act is also subject to criminal liability under 1693n.
If an unauthorized transfer occurs, your personal bank cannot hold you liable for amounts greater than $50 or the amount stated in 1693g in certain circumstances.
If you think you need to file a lawsuit about an unauthorized transfer, call us or take a look at the definitions in 1693a to ensure the act applies to all the parties, plus look at the implementing Regulation E, 12 CFR Part 205, et seq., as it implements the EFTA, or call our law firm if you live in Ohio.
The credit card company can take money from a deposit account with court authorization. However, it cannot use a cognovits (admission of liability) to obtain an immediate judgment without your permission. Cognovits are illegal under federal law in consumer transactions, as an unfair credit practice under 16 CFR Part 444.2, meaning creditors must resort to the judicial system set up in each state to enforce debts. That is, the credit card company must normally sue you in court, obtain a judgment, then collect on that judgment through the court system. This can take months to years, depending on whether you defend the lawsuit.
For example, in Franklin County Ohio, amounts over $15,000 are under the common pleas courts jurisdiction. Judges in that court report a case load of about 1,000 cases each due to the high number of foreclosures, meaning it could be over a year before you get a trial date (if you survive the preliminary motions and motion for summary judgment). Small amounts that are able to be litigated in small claims court may generate judgments much faster.
While the court can order a freeze on your bank account at the beginning of the lawsuit, this generally occurs only when the credit card company knows which bank you have assets and there is a likelihood the funds may not be there when the lawsuit is done. It process is rather unusual, and generally the credit card company will need to wait for a judgment before freezing your assets and then taking them.
If the account is transferred to a collection agency, then the Fair Debt Collection Practices Act will probably kick in. That is available at 15 USC 1692, et seq. It does not apply to credit card companies collecting on their own debt, unless debt collection is their business. It offers great protections for consumers from harassing phone calls.
If you have limited (or no) assets and lots of debt, it is wise to at least have a conversation with a bankruptcy attorney. They can provide direction or help figuring out how to protect limited assets from creditors through bankruptcy. If you are in school and rely on student loans, it would be very wise to also talk with your financial aid office to determine what, if any, effects bankruptcy will have on your ability to continue in school (stemming from the ability to obtain financing). A Bankruptcy filing can eliminate your ability to qualify for grad-plus loans without a strong co-signor (over the government subsidized $20,500 per year).