A creditor or collection agency legally has the right to access your bank account in certain circumstances. They do not, however, have general access to your account in most cases. You or a court judge usually must authorize the access.
Need for a Court Order
State and federal laws require creditors and collection agencies to go through due process to gain access to a debtor's bank accounts. This requires them them to try to contact you about your debt and give you time to respond. If you don't respond and don't pay your debt, the creditor or collection agency still has to prove you owe money. To do this, it files a complaint against you in court. The judge either dismisses the creditor or collection agency's claims or gives it a judgment for garnishment. It is only after the creditor or collection agency has this order that it can ask your bank to freeze or deduct money from your account. The court always sends you a notice that a creditor or collection agency has filed a complaint, so it should not come as a surprise if the creditor or collection agency takes money through a legitimate garnishment order. However, some government agencies, such as the IRS, do not need a court order to access your bank accounts.
Debtor-Authorized Access
In some cases, you may give a creditor or collection agency access to your bank account. For example, you may elect to have one or more of your utility bills paid through automatic electronic withdrawal. To do this, you have to give the creditor/service provider your bank account number. The creditor or collection agency is not supposed to use your bank account information for any purpose other than what has been authorized, and most creditors and collection agencies give you the option of ending the account authorization so you can pay with other funds.
Exemptions to Access
Certain funds that may be in bank accounts are exempt from garnishment. These include most forms of local, state and federal aid, such as Social Security. Creditors and collection agencies also generally aren't allowed to access your unemployment or retirement benefits. If you can specify the money in the account that is from exempted sources, creditors and collection agencies can't take those funds, even if a garnishment order allows them to access the account.
Significance
You should understand your rights regarding creditors' and collection agencies' access to bank funds. Creditors and collection agencies that take money from your account without authorization can leave you financially devastated. At the very least, they provide great inconvenience, as you won't be able to withdraw from the account until your debt is paid. This can mean overdrafts on automatic withdrawals you've set up and the need for contacting others you owe to work out payment plans. You can report improper collection practices to the court and to the Federal Trade Commission, and, if necessary, you can hire an attorney.
0 comments:
Post a Comment