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Continuous Payment Authority: your rights

Emma Lunn
by Lovemoney Staff Emma Lunn on 14 December 2012  |  Comments 7 comments

The Office of Fair Trading (OFT) has warned businesses about misusing continuous payment authorities (CPAs) amid fears that customers don't always know exactly what they are signing up to.

Continuous Payment Authority: your rights

Once agreed by a customer, a CPA allows a business to take a series of payments using a their debit card or credit card without having to seek express authorisation for every payment.

CPAs are often used to collect repayments for payday loans as well as services including vehicle breakdown, insurance, gym membership, online dating, and magazine subscriptions.

But the OFT says customers are not always being made aware of what they are signing up to and may be misled about their rights to cancel.

What businesses need to do

The OFT has issued a set of principles to businesses using CPAs to ensure they fully meet their legal responsibilities when using this method of payment.

The OFT says businesses must:

  • Be fully transparent about terms before a consumer signs up to a CPA arrangement.
  • Ensure the consumer has given informed consent to the use of a CPA, and do not use 'opt out' provisions or other means to automatically assume the consumer has given consent.
  • Provide adequate notice of any changes to the scope of the agreed authority, such as the amount or timing of payments.
  • Provide clear and prominent information on how to cancel a CPA.

Consumers confused about CPAs

We reported earlier this year that consumers were often unwittingly signing up to CPAs without fully realising what they were agreeing too.

In many cases simply ticking a box online commits customers to a CPA – and often for a service they didn’t ask for or don’t need.

It's not just traders that have been in trouble on this issue. Banks have also been caught giving wrong advice.

A Consumer Focus mystery shopping survey of nine major banks carried out earlier this year found almost half of advisers (44%) gave the wrong answer or couldn't give an answer when asked how to cancel a CPA.

Some said that the payment could only be cancelled by the company receiving it – but this isn’t the case.

How do you cancel a CPA?

Many consumers mistakenly think a CPA is like a direct debit or standing order – but it’s quite different.

With a CPA payment is taken via continuous or recurring payment authority on either a debit or credit card. Customers give a company their card details and authorise it to take regular payments from their account.

With a direct debit, on the other hand, you give a business your sort code and account number for it to take payments. These can be cancelled much more easily by simply deleting the direct debit on online banking or calling your bank.

Earlier this year the Financial Services Authority (FSA) issued some updated guidance to set the record straight. It said: "In most cases, regular payments can be cancelled by telling the company taking the payments. However, you have the right to cancel them directly with your bank or card issuer by telling it that you have stopped permission for the payments.

"Your bank or card issuer must then stop them – it has no right to insist that you agree this first with the company taking the payments."

CPAs and payday loans

One area where CPAs are often used, and regularly abused, is payday loans.

The OFT says it often sees payday loan companies mis-using CPAs and adopting aggressive debt collection tactics.

It has launched ‘formal investigations’ into several payday lenders due to concerns about their debt collection practices – and CPAs are a key part of the investigation.

Citizens’ Advice has also raised concerns about payday lenders’ use of CPAs. It says that in some situations payday loan companies repeatedly request money from customers’ bank accounts regardless of whether the customers has attempted to renegotiate payment dates or has other priority debts. In some cases this leaves customers without money for their mortgage, rent or other living expenses.

Citizens Advice also says payday lenders often take payments without notice and for seemingly random amounts – ranging from numerous small amounts to a significant sum – which cause significant problems particularly when the payments empty a consumer’s bank account.

have you had any issues with CPAs? Let us know about your experiences in the comment box below.

More on consumer rights:

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Why extended warranties can be an expensive mistake

What doesn't the Financial Services Compensation Scheme cover?

Your rights when a company goes bust

Sneaky tricks firms use to keep you as a customer

Why some contracts aren't worth the paper they're written on

The most successful PPI complaints

Small claims court: get the money you are owed

Cold calls: how to stop unwanted phone calls

Financial Ombudsman Service: how to complain to the FOS

Your rights if you change your mind

Tenants: Know your rights

The Sale of Goods Act: your consumer rights

Your rights when stores mis-price items

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Comments (7)

  • rbgos
    Love rating 84
    rbgos said

    This doesn't go far enough. I feel that:

    - If you can sign up to a CPA on-line, there should be a button, when you sign up, that allows you to opt-out of the CPA and instead the company has to chase you for payment every time

    - If you do sign up to a CPA on-line, you should also be able to cancel it on-line. Very many places require you to make a 'phone call or write if you want to cancel. Of course, this is to give them the opportunity to try and talk you out of cancelling, and they DO try hard!! They also sometimes have absurdly long notice periods, to give them the chance to scam one more payment out of you even if you do successfully cancel. And the instructions on how to do it are often well hidden on the website.

    I signed up to a CPA for a dating website (Be2.com) that was damned near impossible to cancel. I think in the end I had to send them a fax!! Who uses faxes in 2012??? This really tipped my impression of the website from "over-priced dating site" into "utter scam site that primarily makes money by trapping people into payments they can't cancel".

    Report on 19 December 2012  |  Love thisLove  0 loves
  • BOOTNICKPETE
    Love rating 0
    BOOTNICKPETE said

    I came a cropper over this "scam". I signed up for motorbike insurance and was asked for my card details to take the first payment. The remaining payments were taken by direct debit. During the second year my circumstances changed and I cancelled the policy by following the correct procedures. I then received a letter from the insurers saying I had not cancelled correctly and there was a fee of over £50 to pay plus outstanding premiums. This they then took by using my debit card details without any further reference to myself. I complained to my bank who said they could not do anything about it. The good news is that after along fight I was refunded by the insurers as I am fairly familiar with the law. They had no right to take the payment as the matter was in dispute.

    Report on 19 December 2012  |  Love thisLove  0 loves
  • marram
    Love rating 49
    marram said

    I joined a poetry website but when I wanted to leave it took six months to stop them taking my money. The Co-op bank kept telling me I could not cancel a CPA except by contacting the website direct.

    I argued with them month after month, they did get the money back but they kept paying it and I had to phone them to recover it every month. In the end I wrote to the address on the website (unable to get a reply on the phone) and threatened them with legal action - they had barred access to the site immediately I told them wanted to cancel but kept taking the money! It stopped immediately. Sharks. I'll NEVER do a CPA again.

    Report on 19 December 2012  |  Love thisLove  0 loves
  • CuNNaXXa
    Love rating 410
    CuNNaXXa said

    They should BAN continuous payment authorities. We already have Direct Debits for these payments, or Standing Orders which we set up, so continuous payments already have a mechanism in place for them.

    Who conceived such a stupid mechanism? Why did they think we would need such a mechanism? Why do we have a three digit security number if they can bypass such security?

    CPAs are way too dangerous. A few years back, I made a one off transaction, yet a year later, the company tried to make a second charge to my card. I rang them up and forbid them from even trying to charge my card a second time. As a British Insurance company, they complied, but many foreign firms don't have such scruples.

    Watch out for Insurance companies who send you a renewal letter telling you that you need do nothing if you want to auto renew. They should have to ask you to renew, rather than use existing card details to charge you again.

    In fact, Chip and Pin is next to useless, because they can put through a transaction as 'Customer Not Present', bypassing this measure of security.

    Report on 26 December 2012  |  Love thisLove  0 loves
  • Extremist
    Love rating 16
    Extremist said

    The best way to instantly stop these payments that are taken by firms who are mysteriously hard to get hold of when it comes to ceasing payments is to phone your bank and tell them your Debit card has been damaged, they will send you a new one out. Anyone taking payments will be stuffed then, because the 3-digit security code on the back will be different and the old one will be invalid.

    Report on 02 January 2013  |  Love thisLove  0 loves
  • crunkchild2002
    Love rating 0
    crunkchild2002 said

    I joined RaC and paid an annual subscription by debit card. After a year I never recieved a renewal letter but then found over £150 was debited from my account as rac had taken this amount on continuous payment which i never agreed to. I then spent time on an 0845 number to argue for my refund which took 2weeks to be returned.

    Report on 11 January 2013  |  Love thisLove  0 loves
  • Bobski
    Love rating 20
    Bobski said

    Admiriral Insurance....I told them when I took out a policy that I did NOT wish for auto renewal, and they said they could not do this and to call when insurance was up!

    Report on 11 January 2013  |  Love thisLove  0 loves

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