Have you been caught out by recurring credit card payments?

by , Principal Policy Adviser Money 12 April 2011
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This week, AA customers were up in arms about continuing credit card payments, despite efforts to cancel their memberships. And it’s all down to the old-fashioned way recurring credit card payments work.

Credit cards

Imagine if you wanted to cancel a direct debit, but the only person who could cancel it was the retailer you wanted to stop paying. Sounds ridiculous, right?

Yet this is how the credit card equivalent of a direct debit – the ‘continuous payment authority’ (CPA) – works.

How do you stop the payments?

AA customers have been very vocal on BBC Radio 4′s Money Box programme about the troubles they’ve had with continuing payments, regardless of attempts to cancel their subscriptions.

Thankfully, the AA has said that it will review its procedures, but there are unscrupulous retailers out there who will intentionally ‘ignore’ cancellation requests. You can’t cancel the agreement yourself, nor in theory, can your credit card provider. Only the company that accepts this type of payment can call it off.

Not even cancelling your credit card will stop the payments. Card companies are obliged to make any payments under a CPA, which can be really bad news for consumers.

If you’ve moved house since you cancelled a credit card, chances are you wouldn’t even think to notify the card company of your new address. So if a payment is taken from your old card by a retailer under a CPA, you won’t get a credit card statement and thus won’t know that there’s a bill to be paid. The damage to your credit file could be disastrous.

Companies must use CPAs responsibly

The emails in my inbox suggest that ID fraud insurance contracts are among the most complained-about products as far as continuing payments go. Many consumers signed up and paid for a three-year contract – when this expired, a renewal premium was taken, even where the credit agreement had been cancelled a couple of years earlier.

So what’s the answer? First of all, there is an alternative – the trusty direct debit. Not only do direct debits mean that I’ll never miss paying a bill, I can cancel them at any time to make sure retailers I no longer use don’t take any more cash from my account.

I’m not saying that CPAs, used responsibly, don’t have a role to play. They can be a handy way to pay for regular goods or services without constantly authorising payments. Plus, most reputable retailers will cancel your agreement as soon as you ask them to. Indeed, many Which? subscribers pay with a CPA and we always act promptly to make sure cancellation requests are dealt with swiftly.

Simply bringing CPAs in line with direct debits, by letting consumers cancel their regular payments at any time would, in my view, be a much fairer system.

As it stands, we’re continuing to lose out at the hands of companies that are either unscrupulous, disorganised or both.

55 comments

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CASussex

It’s a con. I had a car insurance policy with Churchill for a few years on auto renew, always meaning to check out the options every renewal, but never getting around to it till last year. Close to the insurance expiry date i emailed Churchill that i was cancelling, found an alternative, took out their policy & then learned a few days later that Churchill had also taken my premium. I was mad, wrote to Churchill and got a full refund eventually. They said they didn’t receive my mail. Strange that they responded from the same address though.
Seems a convenient and useful idea, but not necessarily always the best idea unless you understand it fully.

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wavechange

Emails do go missing and coincidentally, I have just had an example of this. I have no idea how many do go missing but it does happen, which is why confirmation of receipt is essential for anything important. It might also be carelessness or incompetence. :-)

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RussellR

CASussex – also, you say that you cancelled close to the renewal date. It may have been too close for Churchill to stop the auto renewal, as processing often starts a week or so before the actual renewal date, so that all is in place on expiry of the old policy.

I have just been updating mailing list records as I have a new email address, and some senders warn that I need to allow a fortnight before the new address is used as mailings are prepared in advance.

If you need to change/cancel at the last minute, it is probably better to telephone – and take details of who you spoke to and when.

In my experience, few companies react to a request for an acknowlegement and as Wavechange says, emails do go astray.

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Adam Hardy

We just tried to cancel a continuous payment authority to Aviva for an annual car insurance policy with Barclaycard, but we were advised that they are unable to cancel the authority because they have no records of such authorities until such time as a withdrawal is made, and they only keep records of withdrawals going back 6 months.

So it clearly seems that Barclaycard are in direct contravention of the FSA’s guidance/regulations and it is impossible to cancel an annual continuous payment authority 6 months after the last payment was made.

Can’t get any clearer than that!

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Shona

Hello

You can report them to FSA and threaten to take them to small claims court. That generally seems to work. Barclaycard need your authorization for a continuous payment and you have a right to withdraw that continuous payment authority at anytime. The fact is you have given them notice of this and they should stop the payment.

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Chris Middleton

Currys are now starting to use CPA’s for their Computer Cloud Protection Annual Insurance. No problems in previous years when I paid with my Credit Card in the Currys Store ( and they also loaded up the Cloud for me}. However when I took the Laptop in a couple of days ago for it’s annual service and for installation of the next years Cloud Protection, I was advised they could no longer load up the Cloud and I would have to go Online after the Service was completed to get the Cloud installed. Although I had already paid by Credit Card in Store for the Cloud, when after receiving the Laptop back I went Online this evening 18/7/14 it would only install it if I gave all my Credit Card details (including Security Code) for the 12 months Cloud starting the following year in July 2015 !! I will be calling at Currys in the morning to cancel the Cloud and get a refund.

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