60 second guide to recurring paymentsWhich? explains your rights on continuous payments

07 May 2012

Your bank must cancel your recurring payments if you ask them to

With Banks and Building Societies under pressure to make it easier for consumers to cancel recurring payments coming out of their accounts, Which? Money explains what you need to know.

A recent study by Consumer Focus found that 44% of bank advisers are unable to tell customers how to cancel a continuous payment, despite new laws put in place to protect consumers in 2009.

Recurring payments - what are they?

Officially known as a continuous payment authority (CPA), a recurring payment lets consumers allow regular payments to be taken from their credit or debit card, in the same way that direct debits are taken from their bank accounts.

These are typically used for things like subscriptions or memberships to magazines and organisations like the AA, for example. In some cases, you may think you are making a one-off payment but actually signing up to a CPA.

Recurring payments - what’s wrong with them?

Recurring payments give the control to the organisation you are paying.  Until 2009, only the payee was able to cancel the payment, so even if you cancelled a magazine subscription it would have been up to that company to cancel the regular payment from your card.

While most reputable companies would cancel the payment immediately, there were many that didn't, meaning you could go on paying for a product or service you no longer received.

Another problem is that the recurring payments were often variable, so a company could raise the value or the frequency of payments without you knowing. Setting up a CPA with an online and/or overseas company carried heightened risk. Some firms refused to acknowledge the cancellation requests, which could result in a long struggle to put an end to the payments.

What are the new rules?

Since 2009, consumers have the right to cancel a CPA themselves. This means the credit card provider with whom the CPA was established, would be taken out of the equation, leaving them to resolve any outstanding payments with the company directly.

Financial Services Authority (FSA) guidance is clear. '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,' it states.  

What can you do?

Despite a recent BBC Money Box investigation finding evidence that customers had been wrongly advised by Lloyds TSB and Santander, remember that you now have the power to cancel a CPA yourself.

If you tell your bank that you wish to cancel the payment then they are obliged to make that happen. To be doubly sure, you can contact the creditor, as well as your bank.

If you are unhappy with the advice or service you receive from a provider you can lodge a complaint with the Financial Ombudsman Service.

More on this…