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What is a Continuous Payment Authority?
Continuous Payment Authorities (CPAs) are used by many finance companies, retailers, and service providers to collect loan repayments, membership charges and subscription instalments. Though similar to a Direct Debit, CPAs have some key differences that you should understand to prevent problems from occurring.
A CPA, also known as a recurring payment, allows regular sums of money to be taken from a debit or credit card. CPAs are common for subscriptions to services like Netflix, Amazon Prime and Spotify, as well as items such as breakdown cover, insurance policies, short-term loans, and to top up Oyster Cards by Transport for London (TfL).
CPAs became somewhat controversial a few years ago when payday loan companies were in the news as the Financial Conduct Authority (FCA) tightened up the rules on lending. Some payday loan customers found themselves with unexpected payments, problems cancelling CPAs, and resulting financial difficulties. The way CPAs have to be operated has since changed.
Because of the way in which they work, CPAs can be a little trickier to manage than other payment mechanisms such as Direct Debits. By signing up to the CPA terms, a customer agrees that money can be taken from the card whose details they have provided.
Knowing which recurring payments you have authorised, where to find the details of them, and understanding your rights to change or cancel a CPA should enable them to be a straightforward way to manage your financial commitments.
How does a Continuous Payment Authority differ from a Direct Debit?
Both CPAs and Direct Debits are mechanisms for making regular payments. Direct Debits are taken from your bank account and can be managed by online banking. CPAs use your credit or debit card to access funds to make payments.
A CPA is facilitated by giving the provider or retailer the long card number and security code on the card. When you set up a Direct Debit, you do so by giving the company your bank account number and sort code.
You agree to a Direct Debit by signing a Direct Debit mandate. This can be done via post, online or over the phone. The arrangement is covered by the Direct Debit Guarantee. This is a nationwide scheme overseen and facilitated by an overarching organisation. The Direct Debit Guarantee means you can cancel the arrangement at any time, and if there is an error, you are entitled to a full refund.
A CPA is set up by agreeing to its terms and conditions. Unlike the Direct Debit mandate, there is no standard template for signing up to a CPA, but there are still rules about how they should operate.
Essentially, a company can only make two attempts to take a recurrent payment from your card. It used to be the case that multiple requests for payment could be made, and if the full amount was declined by the card provider, an attempt to take a smaller payment could be made. This is no longer the case, and only the full due amount can be requested.
If you have set up a CPA, the key things to consider are understanding the terms you have signed up to and how to cancel a CPA. It also pays to know what CPAs are active on your accounts and whether you even agreed to it being set up in the first place.
How do I know if I have a Continuous Payment Authority?
If you have been asked by a company to provide them with the long number off the front of your credit or debit card, then you may have set up a CPA if that company sells something or provides a service. If such a company asked for your bank account number or sort code, it’s more likely a Direct Debit was set up.
Once a CPA has been established, it can be difficult to identify. Often, it will be a case of keeping a close eye on your bank and credit card statements. You might be able to spot them in the ‘payments due’, ‘scheduled payments’ or ‘pending payments’ section of your online banking account, but equally as often, they aren’t marked up as a regular transaction. CPAs should be identified differently by your bank to Direct Debits as they are processed.
What sort of problems can a CPA lead to?
There have been instances of unscrupulous companies setting up CPAs while not being entirely transparent with customers that that is what is happening. For example, a company may have asked for someone’s card details suggesting this was to verify their identity while the terms and conditions the individual is signing up to also authorise a CPA. The rule of thumb is if someone does ask for your card details, check the small print for anything that enables future payments.
The biggest problems tend to arise with little-known companies who don’t readily publish their contact details. Sometimes these firms are based outside the UK, which makes it even more challenging to sort issues out with them. There have been cases where a CPA has been set up with an organisation that is simply impossible to get in touch with.
There are also issues caused by the way in which some banks, building societies and credit card providers advise their customers on recurring payments. This is when you need to know your rights on how you can manage the CPAs that has been activated on your card accounts.
How do I cancel a Continuous Payment Authority?
Guidance from the Financial Conduct Authority (FCA) suggests that everyone has the right to cancel a CPA at any time. In the first instance, it is recommended that anyone who wants to end a CPA contacts the supplier or retailer to discuss the payment and request it be cancelled. This may allow you to change the frequency, amount or dates the payment is taken, for example.
However, despite what some banks, building societies and credit card providers may allude to, you can approach them in the first instance and ask that they cancel the CPA. This is especially useful when you have experienced difficulties ending a CPA or cannot contact the lender or service provider.
The rules around recurrent payments have been tightened up in recent years, and the FCA now says that if a customer has been clear that they wished to end a CPA, the bank or credit card firm should refund their account if complications arise and further payments are taken.
If you’re not comfortable with setting up a CPA for any type of transaction, be it a subscription or a payday loan, then there may be instances where an alternative payment method is possible. For example, you may be able to pay manually or request a Direct Debit instead. This is quite rare though. Often, the best option is to fully arm yourself with knowledge of CPAs and your rights and understand the recurrent payments that are set up on your debit and credit cards.
Also, remember that if you have experienced problems with a bank, building society or credit card provider and a CPA, then you have the right to complain to the company themselves and to the Financial Ombudsman.