New Consumer Focus research shows that banks’ customer service advisers are unclear of the rules around Continuous Payment Authorities (CPA) and could be giving customers incorrect advice as a result.
The mystery shopping survey found that almost half of advisers (44%) gave the wrong answer or couldn’t give an answer, when asked how to cancel a CPA. This lack of clarity from the banks makes it difficult for consumers to know their rights around CPAs, which could be leading to payments being taken without the customer’s knowledge or consent.
A CPA is a type of regular automatic payment arrangement set up using a debit or credit card. Similar to a direct debit, consumers give a supplier or retailer permission to take payments on their card. CPAs are favoured by many businesses, including payday loan providers, gyms, insurers, magazine companies and internet service providers. The timing and amount of the payment may vary. A CPA may also be called recurring payment authorities, recurring transactions or recurring payments.
Consumer Focus undertook mystery shopping among nine leading retail banks in order to test customer advisers’ awareness of how consumers should go about cancelling a CPA. The correct answer would have been to cancel the CPA through the bank, while also advising the supplier or retailer that the CPA was being cancelled1.
The survey found only 56 per cent of customer service staff gave a correct answer, 44 per cent got it wrong or could give no answer at all2. Worryingly, 28 per cent of customers were told they could only take their query to the company which had set up the CPA, which is contrary to Financial Services Authority guidance.
Sarah Brooks, Director of Financial Services at Consumer Focus said:
‘CPA’s are a frequently used but little understood form of payment. Problems with cancellations are leaving consumers going overdrawn or paying for something they no longer want, which is unacceptable. Customers are naturally not experts on this payment method, so it is essential bank staff know the rules and give clear and accurate advice.
‘Consumers should be clear that they can cancel a CPA simply by contacting their bank. Ideally the customer should also contact the business involved– but crucially they do not need the company to cancel the CPA for them.’
Some of the difficulties consumers face with CPAs include:
- Being passed between the bank and business, with neither taking responsibility for cancelling a CPA. This can leave the consumer feeling their only resort is to cancel the payment card used
- Businesses are using CPAs to take additional charges over and above the payment for products and services being subscribed to, e.g. fees for debt recovery
- Cancelled CPA payments are being taken on a cancelled card and debited on a new card linked to the same bank account, without the customer’s permission.
- Consumer confusion over what has been consented to, particularly as agreements are made with no paper record of what was agreed and the terms are not obvious to the average consumer. This has been a particular issue with shopper discount and savings websites.3
It is particularly important for consumers to contact their bank if they have any trouble contacting the business concerned or are in any doubt as to whether the company will carry-out the cancellation. Consumers will still need to pay any debt that is outstanding, but the company cannot require the customer to pay this through a CPA. The watchdog would also encourage any customer given the wrong advice about cancelling a CPA to log a complaint with the bank concerned.
To improve the problems consumers are facing with CPAs, Consumer Focus is calling for measures including:
- Clear and accurate information to be given to customers on CPAs, from bank customer service staff and on websites, especially around cancelling payments
- This advice must also make clear that any money taken from the customer’s account after the CPA is cancelled should be immediately refunded to the customer by the bank4
Notes to editors:
- Consumer Focus conducted mystery shopping among nine UK retail banking providers (Santander, Barclays, HSBC, Lloyds TSB, Halifax, Bank of Scotland, RBS, NatWest and Nationwide). In all 308 contacts were made: 126 by telephone. 127 face-to-face at a branch and 55 by visiting a website.
- The question asked was: ‘If I set up a monthly payment via the internet to a gym, using my debit card, I’ve been told by my partner that would be something called a “Continuous Payment Authority”. If later I want to stop that do I contact the bank or do I have to contact the gym?’ There are several correct answers which are: contact both the gym and bank; contact the bank; contact the bank but ideally also the gym. A fourth answer would probably enable the customer to cancel their CPA correctly but not necessarily guarantee it: contact the gym but also ideally the bank.
- Contact the bank (but ideally also the gym) 27% Correct
- Contact both the bank and the gym 11% Correct
- Contact the bank 7% Correct
- Contact the gym but ideally also the bank 11% Correct
- Contact the gym 28 % Incorrect
- Cannot find an answer after 5 minutes web search 11% No answer
- Other answers 5% Incorrect
Consumer Focus will be sharing this research with the Financial Services Authority which regulates the Banks and with the Office of Fair Trading, which is responsible for regulating consumer credit.
- Consumer Focus Investigations has been looking at this market, including companies using the trading names of Rewards First and Shopper Discounts and Rewards, and has already raised concerns with the OFT. Consumer Focus is aware of consumers signing up to what they thought were one-off discounts or offers on a leading retail website (e,g, £10 of a purchase) without realising they were entering in to a monthly subscription agreement operated by a third-party such as Shopper Discounts and Rewards. Consumers reported only being made aware of this when money was debited from their current or credit card account at a later date. Consumer Focus is concerned that consumers could be misled because the details or Terms and Conditions provided were not clear and many of those who have complained report never receiving the confirmation and follow-up emails after they accepted the money off voucher.
- Where a supplier keeps taking money out of an account after the CPA has been cancelled the bank must immediately refund the consumer. The bank can then pursue the supplier for reimbursement of this money.