What is a ‘continuous payment authority’ (CPA) on a payday loan and how can I cancel it?

August 25, 2017

Continuous payment authorities, or CPAs, are often used by payday loan providers as a way to take repayments via a debit card, or sometimes a credit card. A CPA effectively grants permission to take recurring payments, but it can be hard to revoke if you later experience financial difficulty and need to cancel the authority.

Agreeing to a continuous payment authority can cause your overall debt situation to worsen. The payday loan company can take money from your bank account whenever they believe a payment is due, and the ability to prioritise debts such as your mortgage, rent or council tax, is taken away

Prior to 2009, only a lender could cancel a CPA, but under the Payment Services Regulations you can now cancel recurring payments yourself.

What exactly is a continuous payment authority?

A continuous payment authority on a payday loan is an agreement that allows the lender to take money from your debit or credit card, whenever they believe a payment is due. CPAs are sometimes compared with direct debits, but they don’t have the same built-in consumer protection and easy ability for the borrower to cancel them.

This is why you need to be wary when taking out a payday loan, as the lender also has no obligation to inform you in advance of the payment amount or when it will be taken.

The term of a payday loan can be as short as one week, or up to several months, and by using a CPA lenders don’t need to obtain permission to take individual payments from your bank account or credit card.

How does a CPA work?

When a payday loan provider sets up a continuous payment authority, they ask for the long number from your debit card. This is in contrast to a direct debit authority which requires your sort code and account number.

As far as credit cards are concerned, any recurring payment that’s been set up on your card will be a CPA, because you can’t set up direct debits or standing orders on a credit card account.

The terms and conditions of a continuous payment authority used to allow a payday lender to make unlimited attempts to take money from a bank account. If the first claim for the full amount was refused by the bank, they would use the agreement to claim smaller amounts.

Under new rules, lenders can now only make two attempts to obtain money from your account unless you’ve agreed to rollover the balance, and these can only be for the full amount due.

How to cancel a CPA

To stop a payday loan payment you should phone, email or write to your bank and ask them to cancel it. Make sure you note down the date, time, and the person you’re speaking to in case there’s a later dispute.

The cancellation deadline is close of business on the working day before the payment is to be taken. There are templates online that you can download to cancel a continuous payment authority. It’s also worthwhile emailing the lender to let them know that you won’t be making the latest payment.

If you’re wondering whether cancelling your debit card will stop recurring payments, unfortunately it won’t. A payment can be taken even when your card has been cancelled and destroyed – the only way to stop these payments is to approach the bank or card provider.

Continuous payment authority refunds

If a payment is taken by a payday lender without your permission, you have the right to a refund of this amount plus any additional charges. In the same way that banks must cancel an agreement if you request it, they must also refund payments after you have attempted a cancellation.

If your request has been ignored or declined by the bank, you can take your complaint to the Financial Ombudsman Service, which is a free resource set up to resolve disputes between financial firms and their customers.

Because payday loans are relatively easy to obtain, borrowers are likely to encounter problems with continuous payment authorities. We can help if you’re trying to cancel a CPA and are experiencing issues, or simply need more information about your rights. Scotland Debt Solutions has been helping Scottish residents out of debt since 1989. Call our expert team for a free initial consultation at one of five offices around the country.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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