‘Mystery shop’ report highlight that nearly half of bank advisors are failing to give customers the correct guidance regarding the cancellation of recurring card payments.
Consumer Focus’ research investigated the response that customers received when they asked their banks to cancel a continuous payment. The report showed that in 44% of the 300 instances tested customers were given inaccurate advice or no guidance whatsoever. Their research was executed in nine of the ‘major’ bank firms: Lloyds TSB, Santander, HSBC, Bank of Scotland, RBS, NatWest, Barclays, Halifax and Nationwide.
Continuous Payment Authorities (CPAs) operate in a similar way to Direct Debits or Standing Orders in that businesses use CPAs to take payments from you on a regular basis. However, CPAs are taken directly from your credit or debit card number as opposed to from your bank account number as with Direct Debit and Standing Orders.
Another key difference between these notions is that with CPAs, it is the business or company that has full control of how much money they take from you and when they take it. This contrasts with Standing Orders where you choose the amount and the date that it is taken. With CPAs, consumers do not have the bank guarantee that they are offered with Direct Debits.
CPAs are often favoured by gym providers, magazine subscriptions, internet providers, credit check companies and ‘payday loan’ providers in order to allow them to take regular, automatic and often sporadic payments from customers’ cards. They are often set up via telephone therefore consumers may not have written agreement of the proposal.
Since November 2009, customers have the right to direct their bank to cancel CPAs without having to make the command to the company or business themselves. The bank must act accordingly and stop the CPA however the customer will still be responsible for anything that may be owed to the company.
The Financial Ombudsman revealed that a number of complaints had been received from consumers regarding CPAs on their account which were unfamiliar or claims that the company had assured it would be a ‘one-off’ payment. They suggested that the air of confusion between CPAs and direct debits ‘can sometimes be shared by some bank staff too’.
Just over half (56%) of bank advisors examined in the Customer Focus report managed to offer customers the correct advice on cancelling a CPA. Sarah Brookes, Director of Financial Services at Consumer Focus explicated:
"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."
She went on:
“CPAs 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."
Consumer Focus aired concerns that a number of large organisations are taking payments greater than agreed from customers’ cards on a regular basis.
Natalie Ceeney of the Financial Ombudsman Service stated:
"If you spot a payment on your account that you do not recognise, let your bank or credit provider know as soon as possible. It pays to know your rights, so remember, if you are not able to sort things out the ombudsman may be able to help."