A payment plan agreement is the written contract for paying over time. It names the parties, the total, any deposit, the schedule of payments, how each payment is taken, and what happens if one is late or missed. If the plan debits a consumer's bank account automatically, Regulation E requires an authorization "signed or similarly authenticated by the consumer" (12 CFR 1005.10(b)). Under the federal E-SIGN Act, a contract can't be denied legal effect solely because it was signed electronically (15 U.S.C. 7001(a)).
What is a payment plan agreement?
It is the contract a customer accepts before a plan starts. It records what they owe, when each payment is due and how it will be collected. It is what you point to when a payment is missed, a customer disputes a charge, or the plan needs to change.
What should it cover?
| Section | What to write down |
|---|---|
| Parties | Your legal entity and the customer, by name |
| What is being paid for | The goods, service or program |
| Total | The full amount owed |
| Deposit | The amount due at signing, if any |
| Schedule | The number, amount and date of each payment |
| Payment method | Card or bank account, and whether payments are taken automatically |
| Authorization | Permission to charge or debit on the schedule |
| Late fee and grace period | The amount, and how many days after the due date it applies |
| Changes | How a date or amount can be changed, and how notice is given |
| Cancellation and refunds | What happens to paid and unpaid amounts if the customer stops |
| Default | When the plan counts as in default, and what follows |
What does Regulation E require for automatic bank debits?
If the plan debits a consumer's bank account on a schedule, those are preauthorized electronic fund transfers. Regulation E sets three rules that shape the agreement:
- Authorization in writing. Under 12 CFR 1005.10(b), preauthorized transfers "may be authorized only by a writing signed or similarly authenticated by the consumer."
- Notice when the amount changes. Under 1005.10(d), when a transfer will vary in amount, the payee or the bank must send written notice of the amount and date at least 10 days before the scheduled date.
- The right to stop payment. Under 1005.10(c), a consumer can stop a preauthorized transfer by notifying their bank at least three business days before the scheduled date.
Write the authorization into the agreement, and say how you'll give notice if an amount changes. See changing a payment plan after it starts.
Can the customer sign electronically?
Yes. Under the E-SIGN Act, 15 U.S.C. 7001(a)(1), a signature, contract or other record "may not be denied legal effect, validity, or enforceability solely because it is in electronic form." Under 7001(a)(2), the same goes for a contract formed with an electronic signature.
If a law requires you to give a consumer certain information in writing, 7001(c) adds a step. You can provide it electronically only if the consumer has affirmatively consented and not withdrawn that consent. Before consenting, they must get a clear and conspicuous statement of their rights, including the option to get records on paper and how to withdraw consent.
Do lending rules change what it must say?
Sometimes. If a business regularly offers consumer plans with a finance charge, or payable in more than four installments by written agreement, Regulation Z can apply and add required disclosures. See Truth in Lending Act. State law can also set terms, for example through a retail installment contract act.
What helps an agreement hold up?
- Use plain words and the same terms on every page.
- Keep a copy of what the customer accepted, with the date and the version.
- Keep the authorization with it.
- When terms change, get the change accepted in the same way.
General information, not legal advice.
- CFPB: Regulation E, 12 CFR 1005.10, Preauthorized transfers
- Cornell LII: 15 U.S.C. 7001, General rule of validity (E-SIGN Act)
- CFPB: Regulation Z, 12 CFR 1026.2, Definitions
Every figure on this page was checked against these sources on Oct 6, 2026. General information, not legal or tax advice.