Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.
What is a continuous payment authority?
If you’re comparing payday loans, you might have come across the term "continuous payment authority". Here's everything you need to know.
A continuous payment authority (CPA) is an instruction for a business to take money from your account when it feels money is owed.
When you set up a CPA with a business you’ll need to give it the 16-digit number on the front of your debit or credit card. The CPA gives the company permission to take fixed or varying amounts on a date that doesn’t have to be specified beforehand.
You can cancel a continuous payment authority at any time either by telling the company, or by telling your bank.
How is it different to a direct debit or standing order?
A direct debit or standing order is an instruction made by you to your bank, while a CPA is agreed between a you and a business.
With a direct debit or standing order, funds are taken or sent directly from your bank account. With a CPA, payments are taken from your card and are processed by the card network – usually Visa or Mastercard.
A direct debit takes a couple of days to set up, via the handing over of a sort code and account number. You’ll normally (but not always) specify a regular amount and day of the month. A CPA can be set up pretty much immediately on a debit or credit card with just the 16-digit card number. The company that you agree the CPA with will normally tell you what they’ll take from your account and when, but it actually has the authority to take varying amounts as and when it feels it is owed.
If a direct debit fails to go through, you may pay a fine to your bank. This isn’t the case for a CPA, however you may incur a fine from the business that you agreed the CPA with.
Direct debits also offer customers a degree of protection, via the Direct Debit Guarantee. You’ll be able to get an immediate refund in the case of an error. The Direct Debit Guarantee does not apply to CPA’s, however where a CPA is set up using a credit card, you may be able to dispute a payment under Section 75 of the Consumer Credit Act.
Crucially, if you switch bank accounts, the Current Account Switching Service means that all your direct debits and standing orders are switched as well, but this does not apply to CPAs. If you wish to bring a CPA over to a new account, contact the business that you agreed the CPA with to cancel the old CPA and set up a new one.
CPAs and payday loans
Payday loans are usually set up via a CPA. The speed of set-up is handy for these short term loan models, and naturally lenders like the authority it affords them in terms of collecting repayments.
The FCA has introduced regulations to improve the CPA experience, after unscrupulous payday lenders were found to be taking advantage of their freedom to take money whenever they saw fit.
The regulations state that payday lenders are limited to two unsuccessful attempts to use a CPA to take a repayment, and cannot use a CPA to take a part-payment. Customers also have the right to cancel the CPA if they’ve agreed an alternative method of paying the lender back.
If you’re about to take out a payday or short term instalment loan, you should compare lenders first. You can use the table below to estimate the cost of the loan that you have in mind with a range of lenders.
We compare payday/short-term loans from
How do I cancel a continuous payment authority?
The recommended method of cancelling a CPA is through the appropriate department at the business who you set it up with. However, if you’re unable to contact the business or the department refuses to cancel the CPA, you can ask your bank to cancel the CPA. Banks must cancel them for you. If a bank fails to cancel a CPA when you ask, it must refund any subsequent charges made to you as a result of this error.
If you cancel a CPA that’s in place to repay a loan, you’ll need to arrange an alternative method of payment. If you don’t, you could default on your loan, risking a fee, additional interest and damage to your credit score.
Don’t forget that cancelling a CPA won’t stop a business pursuing you for money if they believe they’re owed it, even if this means taking legal action against you.
What are the alternatives to a continuous payment authority?
If you’re uncomfortable setting up a continuous payment authority, you may wish to consider these alternatives:
- Direct debit. A growing number of businesses now accept direct debits as means to repay a short term loan. Even if, in the past, you were told you had no choice but to set up a CPA, this may well have changed.
- Manual payments. Ask if the company will consider letting you pay your charges manually, either through standing order or bank transfers. It’s more of a hassle for you, but you may prefer not to give a lender free rein.
- Use a prepaid card. You can set up a CPA on some prepaid cards, although some lenders don’t allow this. This might be a more comfortable option for you, as the business won’t be able to take more money than what is loaded onto the card.
James's continuous payment authoritiesJames had two CPAs in place – one with a short term lender and one with his local gym, allowing both companies to take a regular sum from his account each month. When he moved to a different area, he phoned the gym to cancel his membership, however the gym was not at all helpful, and told him he could only cancel his CPA in person. James was annoyed, and contacted his bank to get both his CPAs cancelled. He was careful to pay off the final payment of his instalment loan via a manual payment.
Consumers were often warned away from CPAs in the past, due to the ruthless debt-claiming tactics from unscrupulous payday lenders. However, the new regulations introduced by the FCA have really helped to put a stop to this. There are actually some advantages to having your payday loan repaid by CPA – such as the speed of set-up – that make it a favourable option.
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