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We engaged in business with another company that provides credit card processing service. At the time of signing up for their service we authorized them to use ACH by giving them a void check (a common practice).

However, relationship went sour with this company; once we sent them Termination Notice they illegally charged us Early Termination Fee (~$840). We asked our bank to reverse this transaction and thankfully, our bank was able to reverse it and we got our money back. However, the bank below in the letter mentioned:

A permanent stop payment can't be placed because there is an agreement and/or contractual obligation between you and the merchant.

Question: What are our options here to ensure that this company can't retry to take our money again via ACH?

Some ideas that come into my mind (though I am not sure what and why would or would not work):

  1. Close existing account and create a new one that has different account number?
  2. As a temporary solution keep ~$0 balance in the account so that their request for $840 can't be fulfilled? However, would our bank incur any fees because of insufficient funds each time the other company tries to charge us again?
  3. Provide to our bank the service termination notice that proves that we are not in business with the other company anymore and effectively block them. However, termination notice has only our signature.
Jonny
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1 Answers1

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I had a similar situation a while ago, and here's what I learned:

What are our options here to ensure that this company can't retry to take our money again via ACH?

Close existing account and create a new one that has different account number?

Yes.

As a temporary solution keep ~$0 balance in the account so that their request for $840 can't be fulfilled? However, would our bank incur any fees because of insufficient funds each time the other company tries to charge us again?

Bad idea. You may incur penalties for returned payment, or the bank may honor the payment and charge you overdraft fees.

Provide to our bank the service termination notice that proves that we are not in business with the other company anymore and effectively block them. However, termination notice has only our signature

Bank doesn't care. ACH withdrawal is akin to a check. The assumption is that the other side has entitlement. You can put stop payment once its processed and try to reverse it claiming fraud, but the end result will be #1: you'll end up getting a new account set up, while they try to recover the money.

This is one of the reasons I'm reluctant allowing standing ACH authorizations any more. Generally, the American banking system is very much geared against the consumers, and in many ways is very retarded. In a more advanced countries (which is almost any other country than the US), the standing withdrawal authorization goes through your bank and can be revoked.

littleadv
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