Do you know how a continuous payment authority works?


General Finance

Have you heard of a CPA? It stands for 'Continuous Payment Authority', and those three simple letters could have a big effect on your bank account.

A CPA works much like a direct debit payment. It's basically an arrangement for a business to take regular payments from your bank account in return for a service, e.g. a gym membership or mobile phone contract.

However, there are concerns that banking customers are not always clear about what they're signing up to with a CPA - and may be misled about how to cancel them. So much so, in fact, that the Office of Fair Trading (OFT) has issued a set of principles for businesses who use CPAs to make sure customers know exactly where they stand.

What can a CPA be used for?

A CPA, once agreed by a customer, lets a business take a number of payments using the customer's credit/debit card details - without having to get each payment authorised. CPAs tend to be used to collect regular payments from a customer's bank account for things like:

  • Gym memberships
  • Mobile & broadband services
  • Magazine subscriptions
  • Online dating

CPAs are often confused with Direct Debits, which work similarly, but provide more guarantees (e.g. a Direct Debit payment is fixed, whereas a company can take payment on any day with a CPA).

What should companies tell you about a CPA?

A CPA can be a handy way of making automatic payments for some people. However, it was recently found that a number of websites using CPAs didn't follow some consumer protection laws, such as the Consumer Protection from Unfair Trading Regulations (CPRs) - with some traders not making it clear to customers that they're signed up to a CPA - or how to cancel it.

But the OFT's principles are designed to guarantee that customers are fully aware of the financial commitment and are able to cancel them easily. This means that in the future, businesses should:

  • Be transparent about the terms of a CPA before a customer agrees to one
  • Ensure a customer has given informed consent to the use of a CPA
  • Give adequate notice of any changes to a CPA, e.g. the amount or timing of payments
  • Provide clear information about how to cancel a CPA

The OFT will contact the businesses involved to make sure they follow the principles and make sure they're monitored.

How can you cancel a CPA?

You can cancel a CPA directly through the business taking the payment, or with your bank or card provider.

You should tell your bank or card issuer that you've stopped permission for the payments to be taken for your bank account. Although you don't legally have to agree this first with the company taking the payments, it's a good idea to also let the company know.

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