Giving permission to a firm to take payments out of the bank or from a credit card can be a headache for someone on a strict budget.
Millions of consumers have ‘continuous payment authorities’ as monthly subscriptions to clubs and web sites - but often these payments are snatched out of the bank without warning pushing balances in to overdraft and incurring unexpected costs.
Cancelling these recurring payments is also a problem - especially as nearly half of bank customer advisers give the wrong advice, according to consumer rights champion Consumer Focus.
Researchers found 44% made mistakes or could not give an answer, while, 28% of customers were told they could only cancel the payment through the company that set up the payment, which is contrary to Financial Services Authority guidance.
Businesses like to take these payments because they help cash flow - they are favoured by businesses like payday loan companies, gyms, insurance firms, subscription clubs and internet service providers.
The problem for consumers is the payments are taken on irregular dates and sometimes for irregular amounts, which makes sticking to a budget difficult on tight funds.
If the funds are not in the bank, missing the payment can trigger extra bank charges.
Sarah Brooks, Director of Financial Services at Consumer Focus said: “These 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.”
If the bank has given wrong advice that has led to someone paying for something they do not want and incurring charges, the bank must refund the customer and pursue the supplier for the loss.
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Notes to editors:
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