If you have given a company your debit or credit card details to take payment from your account, this is known as a continuous payment authority (CPA).
Continuous payment authorities can be used to pay for memberships and subscriptions, including Amazon Prime and Netflix, as well as for repaying some types of loans.
This means you may have signed up to a CPA without knowing that this was the type of payment method you were using.
Find out more about how continuous payment authorities work, how they differ from direct debits, and how you can cancel a CPA.
What is a continuous payment authority?
A continuous payment authority, also known as a recurring payment, is one way you can pay for services or pay back a loan.
For example, you might use a CPA to pay for a gym membership, insurance policies, or a monthly subscription to a streaming service. If you’ve taken out a short-term loan, you may also repay this via a continuous payment authority.
A CPA gives a company permission to take payments from your account, using details from your debit or credit card.
It may be used for a one-off or infrequent payment, or a regular payment each month, for example.
Because you can’t create a direct debit or standing order from your credit card account, a CPA is the only way you can set up a recurring payment using a credit card.
How does a continuous payment authority work?
When you set up a CPA, you will need to provide the company with your debit or credit card details. So if you authorise a company to take regular payments from your account and you’re asked for the 16 digits on the front of your card and any other information on your card, this is likely to be for a continuous payment authority.
When you share this information, you give the company permission, also known as standing authority, to take payments from your account.
The company will then be able to take the relevant sum of money from your account when payment is due. This could be on a fixed recurring date or whenever the company believes it is owed money.
Companies are allowed to change the amount and date of payments without consulting the individual.
A CPA will continue until you contact the company or your card provider to cancel it.
Be aware when signing up to free trials on subscriptions as a CPA may begin once the free or discount period ends. Always check the terms and conditions before giving a company your card details.
How is a CPA different from a direct debit?
CPAs and direct debits are both types of recurring payment that allow companies to withdraw payments from your account. However, they work in different ways and offer different protections.
Some of the main differences between continuous payment authorities and direct debits are summarised in the table below.
|Continuous payment authorities||Direct debits|
|You provide details from your debit or credit card to set it up.||You use your bank account details (account number and sort code) to set it up.|
|You give a company direct permission to take payment.||You tell your bank/building society that a company is allowed to take payment from your account.|
|Payments can be authorised and taken from your account instantly.||Direct debits could take a few days to be approved and cleared.|
|The company can change the amount and frequency that they withdraw from your account.||Companies have to notify you in advance of any changes to your direct debit.|
|You’re not entitled to the same protection that you get with a direct debit.||You are protected by the Direct Debit Guarantee.|
|You have to contact the company or your card provider to cancel a CPA.||You can cancel a direct debit yourself through your bank or building society.|
|You will need to contact the company directly to change the CPA if your card details change.||Direct debits will transfer to your new bank account if you use the Current Account Switch Service.|
Continuous payment authorities are also different from standing orders. Unlike CPAs, you are in complete control of a standing order as you can set it up and change it yourself through your bank.
With a standing order, you authorise a fixed sum to be paid to a company. With a CPA, the company takes the amount of payment that it is due, which could change each time.
» MORE: Standing orders and direct debits explained
FCA rules for continuous payment authorities
Continuous payment authorities have been the subject of some controversy in the past, particularly with regards to payday loans.
Lenders were previously allowed to try multiple times to take payment from an account if the first attempt failed. They could also take several partial payments instead of one full payment.
This meant that some lenders took money from an account when the individual couldn’t afford it, which could leave them unable to pay for essentials such as rent, bills and food.
As a result, the Financial Conduct Authority (FCA) introduced some rules for continuous payment authorities.
Lenders can now only attempt to take payment using a CPA on two separate occasions, and these can only be for the full amount owed. They are no longer allowed to take partial payments.
Cancelling a continuous payment authority
In the past, some lenders haven’t cancelled a CPA when an individual asked. However, while it can be more difficult to cancel a CPA compared to a direct debit or standing order, you do have the right to stop a CPA.
To cancel a continuous payment authority, you can contact the company directly or your card provider.
If you cancel the CPA through your card provider, it has to do as you requested. It can’t ask you to contact the company directly first (although you should still contact the company the CPA is with).
You will need to cancel the CPA before the end of the working day before your next payment is due to go out.
So if your payment is due to go out on a Monday, you would need to contact the company to cancel the CPA before they close on Friday.
Once you have cancelled a CPA, the company is not allowed to take any more payments.
You are allowed to cancel a CPA for a loan if you think you won’t be able to afford to make the payment. This means the money won’t be taken from your account and leave you overdrawn or unable to pay for essentials.
However, you will still owe the lender the same sum of money and be liable to pay this debt, so you should contact them for help on what to do next.
What if my card expires?
If the debit or credit card that was used to set up the continuous payment authority expires, or you lose your card and get sent a replacement, the details the company has will be out of date.
You should contact the company with your new card details so you can set up a new continuous payment authority.
You will also need to contact the company if you cancel a card that is being used for a CPA.
What if I switch banks?
If you switch banks, you will be issued with a new debit card, which means your CPA will be out of date.
You will need to contact the relevant company to tell them your new card details.
If you switch accounts using the Current Account Switch Service, any direct debits and standing orders will be transferred to your new account automatically. Continuous payment authorities won’t be transferred as they are linked to your card, rather than your account.
How to complain about a CPA
If you believe that a company has used a CPA to take out an unauthorised payment, you have the right to ask for a refund and complain.
For example, this could be if the CPA was set up and payment taken without your knowledge, or if payment was taken after you cancelled a CPA.
In the first instance, you should contact your card provider to ask for a refund. It should issue you with a refund to cover the unauthorised payment and any related charges without delay
If you don’t receive your refund and you believe you have been treated unfairly, you can complain to the Financial Ombudsman.
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