By financen | July 27, 2011 - 4:35 pm - Posted in Payday Loan

An ACH or Automated Clearing House system is a private secured network connecting different banks to one another by way of ACH operators or the Federal Reserve Board. There are many payday loan companies that illegally withdraw money (in form of fee) from the bank account of people without taking prior permission from them. The fee withdrawn may be more than the amount the payday loan company is entitled to take. This may be problematic and can cause a lot of harassment for the common man. This problem may be overcome to a great extent by the ACH or Automated Clearing House system.

The ach processor facilitates comprehensive reporting pertaining to ach transactions in real time. The main role of an ach network processor is to receive ach files from Originating Depository Financial Institution or ODFI, processing them and finally delivering them to RDFI or Receiving Depository Financial Institution. The processor is governed by stringent policies and is directly linked to the Federal Reserve.

However, an ACH transaction may be turned down by the RDFI and returned to ODFI due to the following reasons.

• Insufficient funds in the account.
• When the account holder notifies that the transaction is not authorized.

The ODFI may place it 2 more times for settlement, once if the ACH transaction is rejected

Ach authorization: An originator is a company or an individual and must receive permission from the receiver to carry out the ach transaction. The ach authorization may be electronic, verbal or written. An ach transaction cannot be issued without taking permission from the account holder. The account holder is referred to as the Receiver. The ach transaction may be either in form of credit or a debit.

You must be thinking that how this payday money lender can lend money at such high interest rate and get away by the law? By simply not calling it “interest”. Payday loans charge a “fee” which makes them exempt from the standard usury laws that cap interest rates. In Arizona, the legalize reads like this: “The fee charged by the licensee is not interest for purposes of any other law or rule of this state.”

Arizona (along with 19 other states and the District of Columbia) has given the green light to loan sharking.

Payday loans take advantage of clients who lack financial savvy–who never stopped to think about the “cost of money” or who, quite simply, don’t budget well enough to have $300 in the bank in the event of an unexpected expense.

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Before you close your bank account due to payday loans eating away at your paycheck, please read this.

There are several banks with different policy regarding ach transaction so it is better to go in person and talk to the branch manager. Ask your bank what their policy is on ach transactions on closed accounts before you close the account. Banks having policies regarding ach transaction sometimes are permitted to go ahead and force open closed accounts if any ach transaction takes place within a certain time frame after the account is closed.

Take letters with you showing that you have revoked authorization for each of your payday loan companies to debit your account. If your bank does have this policy, tell them your situation. Don’t be embarrassed. You can ask your bank to put your account on deposit only, by this way you will be putting hold on your ach account before they are closed and your bank can do one of this any kind of negative answer would not be entertained you should let them know.

It is very difficult to leave your bank account open because this payday loan companies have different ways to take money out from your account. As I told you it would not be safe to keep your account open as these companies can produce paper checks and run them through your account without your permission. So closing the account is the best solution to prevent charging your account from this payday loan companies.

It is always safe and suggested that it is better to consult the attorney general or department of financial institution before you close your account. To make sure you are not causing more headaches, some state laws do allow for prosecution if you close your bank account, but that is usually in cases of fraud.

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