Consumer Focus survey shows banks and building societies give wrong or no advice on cancelling recurring payments.
Banks and building societies are giving consumers incorrect advice about how to cancel some recurring payments, which leads to cash disappearing from their accounts without their knowledge or consent, a consumer body has warned.
Consumers paying for some goods and services give companies their credit or debit card details and sign up to a continuous payment authority (CPA), which authorises the company to take regular payments from the account. The payments can be cancelled through the card provider, but as Guardian Money revealed in February consumers are being given bad advice when they try to do so.
An undercover shopping exercise by Consumer Focus has revealed just how poor some of the information being given is, with 44% of advisers surveyed giving the wrong answer or none at all when asked how to cancel a CPA.
Consumer Focus contacted major banks and building societies’ customer services advisers more than 300 times to test staff awareness of how consumers should go about cancelling a CPA.
Customers should cancel the payments through their bank, while also advising the supplier or retailer that the CPA is being cancelled. But just 56% of staff gave the correct answer. Consumer Focus said 28% of customers were told they could only take their query to the company that had set up the CPA, which is contrary to guidance set out by the Financial Services Authority.
Consumer Focus said the lack of clarity made it difficult for consumers to know their rights around CPAs, “which could be leading to payments being taken without the customer’s knowledge or consent”.
Also known as recurring payment authorities, recurring transactions or recurring payments, CPAs are often used by payday loan providers, gyms, insurers, internet service providers and magazine companies.
Consumer Focus raised particular concerns about continuous payments to payday lenders set up on the accounts of people with debt problems. It said debt advice agencies have said cash-strapped consumers are having an even tougher time paying priority bills such as their rent, mortgage or heating costs due to some payday lenders “dipping” into their account.
Sarah Brooks, director of financial services at Consumer Focus, said: “Consumers should be clear that they can cancel a CPA simply by contacting their bank. Ideally, the customer should also contact the business involved, but crucially they do not need the company to cancel the CPA for them.”
The body said that with neither the bank nor the business taking responsibility for cancelling CPAs, consumers may feel their only answer is to cancel the payment card used.
But it also found evidence that cancelled CPA payments are being taken on a cancelled card and debited on a new card linked to the same bank account without the customer’s permission, and that some companies are taking charges over and above the payment for products and services being subscribed to.
The Financial Ombudsman Service said CPA complaints make up approximately a quarter of the regular payments cases it receives.
Complaints tend to involve payments set up without permission, cancellation problems and payments taken on a closed account or card.