• Consumer Protection Law and Advocacy — Chicago, IL

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Be Wary of Recurring Auto Debits

Consumers should be cautious when authorizing recurring auto debits.  Nearly every company — from your most aggressive bill collector to your local gym — now ask that consumers permit automatic monthly withdrawals from their checking accounts.  While this may be convenient and “eco-friendly,” it can lead to problems.  Be aware that a federal law called the Electronic Funds Transfer Act grants you rights when you agree to auto debits.  For example, the Act requires that the terms of your agreement be provided to you when you sign up or before the first auto debit occurs.  You must also be given notice of your right to stop the auto debits and the steps for doing so.

To ensure consumers are aware of these rights, the Consumer Financial Protection Bureau (“CFPB”) recently released a bulletin alerting companies that they must obtain authorization before automatically debiting a consumer’s account.  The CFPB also published a series of letters consumers can use to cancel any recurring auto debit, available at http://www.consumerfinance.gov/blog/you-have-protections-when-it-comes-to-automatic-debit-payments-from-your-account/.   According to the CFPB’s November 23, 2015 press release:

The CFPB is concerned that some companies may be failing to meet the legal requirements for obtaining authorizations from consumers for recurring auto debits. Also, through its supervisory work, the CFPB observed that one or more companies provided consumers with a notice of the terms for preauthorized auto debits that failed to disclose critical information, such as the amount and timing of the payments the consumer agreed to. If consumers are not given clear information on the terms of auto debits, they may not be able to manage payments or ensure their account balance is large enough to avoid being hit with overdraft or non-sufficient fund fees. In some cases, consumers have also reported companies not obtaining proper authorization to auto debit an account.

Don’t feel pressured to agree to monthly auto debits and if you do agree, keep close track of your monthly bank statements.  Verify the correct amounts are being debited and don’t hesitate to ask for written confirmation of your agreement.  Auto debits should be convenient, not a source of anxiety or confusion.

Avoid Gift Card Traps This Holiday Season

The holidays are upon us and that means gift card season!  Federal and state laws protect gift card recipients but be cautious when purchasing.  Some gift cards and gift certificates contain high activation fees, dormancy charges, and expiration dates.

In Illinois, gift certificates must be valid for at least 5 years from date of issuance.  Post-purchase fees are strictly prohibited and the face value of the gift certificate may not be reduced for non-use or untimely redemption.

Be aware that Illinois’ gift card rules don’t apply to bank-issued gift cards or pre-paid debit cards (Visa, American Express, etc.)  Federal law governs those cards.  Under the Credit Card Act of 2009, if the gift card isn’t used in a twelve-month period, a monthly inactivity fee may be charged, but only if disclosed clearly and upfront.  And while expiration dates 5 years or more in the future are permitted, they can only be assessed if the expiration date terms are clearly and conspicuously stated.

ConsumersUnion® has a list of states and their card laws, available at http://consumersunion.org/research/state-gift-card-consumer-protection-laws-2013-update/.  Be sure to check your state’s specific laws for more information.

In the meantime, read the fine print and make sure any expiration dates or inactivity fees are disclosed.  This will help make sure your gift recipient can use and enjoy the card.