Direct Payments

Many companies and charitable / nonprofit organizations have begun to offer their customers and donors a new automated payment option called Direct Payment.

What is Direct Payment?

Direct payment is an efficient electronic payment alternative to paper checks.  When you use direct payment, you authorize a company to electronically collect a pre-authorized amount from your checking or savings account to pay a bill or donation/pledge.  So instead of writing a check every month, your bank will automatically make the payment on a predetermined date for you.  It’s that simple.

Why Use Direct Payment?

Consumers and companies both benefit from direct deposit.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.

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 the payment. You may also be asked to provide a voided check from your 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 companies bank will instruct your bank to deduct the amount from your account. Your bank then withdraws that amount and forwards it electronically to the companies bank for credit to their account.

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 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 your bank, either orally or in writing, up to three business days before the scheduled payment date. If you call your 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 also want to inform the company you are stopping 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 the bank to stop the payment before it is 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 your bank immediately. You have up to 60 days from your account statement date to notify your bank in person, by telephone or in writing of an unauthorized payment or an incorrect payment amount.  If you notify your bank in person or by telephone, you may also be required to provide a written confirmation within 10 days. If you notify your 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 the 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 the 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 governed by Regulation E.