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.
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.