EFT stands for Electronic Fund Transfer. This is basically a system where funds from a bank account can be automatically transferred to pay another party. Many payday loan and short term loan companies require the customer, as a condition of the loan, to set up an automatic transfer of funds from the customer’s bank account to the lender.
It is important that the borrower understand that they do not have to continue to allow the lender to withdraw money from their account. Especially if the borrower is thinking of filing bankruptcy. These loans are typically unsecured debt, meaning they can be discharged in a Chapter 7 or Chapter 13 bankruptcy. Therefore, if the borrower is going to file and eventually get these loans discharged, it makes no sense to continue to allow the lender to take money from their bank account. Additionally, if you need the money to pay utilities and rent, which is much more important than paying on debt, the borrower should withdraw their authorization for the lender to take money from their account.
The borrower has two options when dealing with automatic withdrawals from their accounts for a debt. The first option is the borrower can call the lender and let them know verbally and in writing that they withdraw the lenders authorization for electronic fund transfers from the account. Immediately afterward, the borrower should go to their bank and request in writing and verbally that you no longer authorize lenders to automatically withdraw funds from your account. Be sure to do this at least 3 days before the next payment is scheduled to go out. The other option would be to simply close the accounts at least 3 business days prior to the withdrawal and set up a new bank account. Closing the accounts prior to the creditor attempting to withdraw money from your account will typically also prevent the bank from charging the customer an overdraft fee. In my experience, the second option is much more effective. Although you will still owe these debts, at least you now have control of your own hard earned money.