A continuous payment authority (CPA) is a type of recurring payment that is often used to pay for subscriptions, memberships and loans. CPAs work differently to direct debits and standing orders, so it’s important to understand more about them and how you can cancel them. <\/p>
A continuous payment authority instructs a business to take money from your debit card or credit card when money is owed.<\/p>
The CPA permits the company to take fixed or varying amounts whenever it believes you owe it – this doesn\u2019t have to be on a set date. <\/p>
A CPA is often used to pay for memberships or subscription services, such as Netflix or Amazon Prime. But it\u2019s also used for short term loans, such as payday loans<\/a>. <\/p> When you set up a CPA with a business, you\u2019ll be asked to provide the 16-digit number on the front of your debit or credit card. You can do this over the phone, online or face to face. <\/p> By giving the provider this information, you\u2019re authorising them to take payments from your account. Your CPA will continue until you contact the company or your card provider to cancel it. <\/p> A direct debit or standing order is an instruction you make to your bank, while a CPA is agreed between 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 \u2013 usually Visa or Mastercard.<\/p> A direct debit takes a couple of days to set up, and you\u2019ll need to provide the company with your bank account number and sort coder. An agreed amount (fixed or variable) will be taken from your account regularly, typically on a set date. Direct debits are often used to pay bills, such as energy, broadband and council tax, and the company must notify you in advance of any changes. Standing orders tend to be used to pay rent or move money to a savings account. They are usually for a fixed amount, and you can set them up yourself.<\/p> A CPA can be set up immediately on a debit or credit card with just the 16-digit card number. The company you agree the CPA with will tell you what they\u2019ll take from your account and when, but it has the authority to take varying amounts as and when it feels it is owed. <\/p> If a direct debit fails to go through, you might pay a fine to your bank. This isn\u2019t the case for a CPA. However, you may incur a fine from the business that you agreed with on the CPA.<\/p> Direct debits also offer customers a degree of protection through the Direct Debit Guarantee. You can get an immediate refund in the case of an error. The Direct Debit Guarantee does not apply to CPAs.<\/p> Crucially, if you switch bank accounts, the Current Account Switch 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 have the CPA with to cancel the old CPA and set up a new one.<\/p> CPAs can be much harder to spot on your bank or credit card statement. Some banks might highlight them in a dedicated section on your statement, but others won\u2019t. However, if you have any payments going out for memberships, subscriptions or loans, it\u2019s likely they will be CPAs. If you\u2019re unsure, contact the company in question to ask. <\/p> CPAs are often used to pay for:<\/p> Payday loans are usually set up via a CPA. The speed of set-up is handy for these short term loan models. Lenders like the authority it affords them in collecting repayments.<\/p> The Financial Conduct Authority (FCA) has introduced regulations to improve the CPA experience<\/a> after unscrupulous payday lenders were found to be taking money whenever they saw fit.<\/p> The regulations state that payday lenders are limited to 2 unsuccessful attempts to use a CPA to take repayment and cannot use a CPA to take a part-payment. Customers also have the right to cancel the CPA if they have agreed on an alternative method of paying the lender back.<\/p> If you want to cancel a CPA, you should always contact the business you set it up with first. However, if you can’t contact the business or if the department refuses to cancel the CPA, you can ask your bank to cancel the CPA.<\/p> 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 due to this error.<\/p> If you cancel a CPA that\u2019s in place to repay a loan, you need to arrange an alternative method of payment. If you don\u2019t, you could default on your loan, risking a fee, additional interest and damage to your credit score.<\/p> Don\u2019t forget that cancelling a CPA won\u2019t stop a business from pursuing you for money if they believe they\u2019re owed it, even if this means taking legal action against you.<\/p> If you\u2019re uncomfortable setting up a CPA, you could consider the following alternatives:<\/p> Consumers were often warned away from CPAs in the past due to the ruthless debt-claiming tactics of unscrupulous payday lenders. However, the new FCA regulations have helped to put a stop to this. There are some advantages to having your payday loan repaid through a CPA \u2013 such as the speed of set-up \u2013 that make it a favourable option. But overall, if you can opt for a direct debit instead, you\u2019ll have more control over what goes out and when.<\/p>How are CPAs set up?<\/h3>
How is it different from a direct debit or standing order?<\/h3>
How do I spot a CPA on my bank statement?<\/h3>
Common uses of a CPA<\/h3>
CPAs and payday loans<\/h3>
How do I cancel a continuous payment authority?<\/h3>
Benefits and risks of a CPA<\/h3>
What are the alternatives to a continuous payment authority?<\/h3>
Bottom line<\/h3>
Sources<\/h3>\n