Problems you may experience with authorizing an automatic deduction.

Automatic deductions (debits) from bank accounts can be a convenient way to pay some regular bills, saving you time, checks, and postage. Nowadays people pre-authorize monthly debits for everything from mortgages, student loans, and utilities to car payments, life insurance premiums, and health club memberships. But you can get into trouble if your automatic payment goes awry.

Trouble Spots

You can find yourself dealing with some unusual problems when you let a third party (your bank) pay your bills for you. For example, if your bank doesn't make automatic mortgage payments on time, it will be you who suffers the consequences: late fees and a blemish on your credit report.

And what if payments aren't made at all? One man whose life insurance premium was deducted monthly from his checking account had no idea that the bank, due to a systems error, had stopped making payments. The policy lapsed, but the family didn't find out until the man died. They had to fight hard to collect their benefits.

Fraudulent telemarketers have caught on to automatic debiting, too. After finding out your checking account number, a scammer can submit a "demand draft" to your bank, which doesn't require a signature. To reduce this type of fraud, a federal law requires a telemarketer to obtain a customer's authorization, in writing or on tape, before debiting an account. Never give out your bank account number over the phone.

How to Solve Problems

You have the right to halt unauthorized and most pre-authorized deductions at any time. If you're having trouble stopping an automatic debit, the fastest way to get results is to contact your bank, not the business that's receiving payments.

Under federal law, you must call or write your financial institution requesting a "stop" at least three business days before the scheduled debit. If you make an oral request, the bank may require you to confirm it in writing within 14 days of your call.

If you've been hit with late fees because the bank was tardy, don't just pay up. Notify your bank of its error within 60 days of the periodic statement showing the error. Generally, the bank must provisionally credit your account within 14 business days while it investigates your complaint.

Protect Your Credit

If you fear your credit history has been tarnished because the bank was late or missed payments, get a copy of your credit report from one of the big credit bureaus (Experian, TransUnion, or Equifax). If it shows missed or late payments that the bank was supposed to make, call the bank and request (politely, but firmly) a letter explaining that the error was the bank's fault. Send a copy of this letter to the credit bureau and ask it to correct the incorrect information.

This should resolve the situation, but if it doesn't, you can ask the bank to provide correct information to the credit bureau. If all else fails, remember that you have the right to add a brief statement to your credit file explaining that the bank missed the payment or made it late.