Preauthorized payment Law and Legal Definition

Preauthorized payment is a written agreement entered into between a bank and a customer to debit the customer's account in order to pay bills or make loan payments. The agreement authorizes the bank to make regular payments. The payment can be to the party bank or to a third party. For example: a loan payment and a telephone bill. The agreement contains the amount to be transferred and the date of making payment. Checks can be used to debit the account.