What are recurring payments?
Officially known as a continuous payment authority (CPA) it allows regular payments to be taken from a debit or credit card in a similar way to direct debits. Typically they are used for such things a magazine subscriptions, gym memberships or even payday loan repayments. Many people think that they are signing up for a one-off payment, or a short series of payments, not realising that they have signed a CPA agreement.
So what's wrong with CPAs?
Unlike a direct debit where the customer has control over payments a CPA hands this control to the organisation you are paying. Until 2009, only the payee could cancel a CPA, so if a customer no longer required a companies services they had to rely on them to cancel the CPA. Obviously reputable companies would carry out the customers request but there were always some that would conveniently forget. Also, many CPAs allow variable payments so a company could raise the amount taken using a CPA without your knowledge.
So what are the current rules?
Consumers now have the right to cancel a CPA themselves and can do this by contacting their bank or credit card provider. They should also inform the supplier that they have cancelled the CPA. If any payments are taken after you have instructed cancellation then the bank or credit card provider must refund theses payments.
Conclusion
Whilst it can save money to subscribe regularly to a magazine or other service I would always advise avoiding a CPA wherever possible. Many suppliers will allow you to pay for their services on an annual basis by cheque, which can reduce your payments even more and put you in complete control of your outgoings.
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