I've had nothing but bad experiences with these automatic payment schemes and they ended up costing me more money than if I had mailed the check myself. What makes it even worse is there is no system in place to resolve disputes. No help from the banks, no help from the payee, and no help from any government agency. You're pretty much at the mercy of them sending you your money back whenever they feel like it.
When I moved across the Atlantic, my wife was much more comfortable with the system here. Every company sent you a form to do deductions and the bills arrived a few days, or weeks, before the deductions were processed. And they are easily reversible if something isn't settled. You've got to love a system that is fraught with abuse and little power for the consumer.
I think the people in that article failed to pay in time and the company requested the outstanding payment correctly. However, in UK there is a standard form for direct debits which says "If an error is made by <the company> or your Bank or Building Society, you are guaranteed a full and immediate refund from your branch of the amount paid." which puts the responsibility on the local branch directly and doesn't allow a refund to wait till some random day in the future (so closing the direct debit should work the way people from the article wanted). Does anyone know if there is a similar rule on automatic payments in US? - I'm just curious.
It's dependent on your bank and it's policies as well as how you setup the automatic payment to begin with in the US. To avoid what happened in the article you can use your banks automated bill pay instead of signing up for the vendors auto mated payment program. That way you have full control over when to start and stop payments. Of course that only works for fix monthly payments for things that fluctuate like water and electric you really have little choice.
I can't get water bills electronically, but my bank gets e-bills for my cable/internet, electric and gas providers so I can easily pay those variable amount bills. In fact, they're completely on auto-pilot. I get notified when the bill is posted and the amount; if I do nothing (the normal case), the bill gets paid from my bank's auto-bill pay system automatically.
Actually direct debit works on any amount - it's ok to pay fixed or variable amounts. Some companies do it differently (like my electricity supplier) and charge me a fixed amount monthly and then send in the balance every year and adjust the payments.
Direct debit is when the vendor pulls the money from your account automatically. Paperless checking is when you setup with your bank to send / push the payment to the vendor. You have much less control over the former than the latter in my experience.
No, there is no protection like that in the US and that was what the article was basically stating. If you allow direct debits you're basically trusting the receiver with full access to your account. If they dick around and wipe you out you have no recourse accept to ask for the money back. If you want to stop payment you have to close the account to be absolutely sure. As long as they have your account details they can go in and take whatever, whenever they want.
I learned this the hard way when I let my mobile operator take payments directly. Someone stole my phone and called fuck all. In the end my rent, car insurance, and utilities weren't paid because the operator took all the money available. And the bank didn't care one bit as the dinged my account for NSF fees for weeks.
I'm not going on a rant about this but I would like to chime in to say that a lot of people I've known who have done automatic debit have regretted it for the reasons stated in the article. It doesn't stop after the specified time and it's an adventure to get your money back. YMMV of course.
This type of shit is endemic because there is no incentive for banking companies to play fair. They move money around with impunity. I hope they are all dismantled or at least muzzled.
When I moved across the Atlantic, my wife was much more comfortable with the system here. Every company sent you a form to do deductions and the bills arrived a few days, or weeks, before the deductions were processed. And they are easily reversible if something isn't settled. You've got to love a system that is fraught with abuse and little power for the consumer.