FCA reminds banks of their obligations when cancelling Continuous Payment Authorities

Consumers who have set up a regular payment from their account will now be able to successfully cancel that arrangement by contacting their card provider, the Financial Conduct Authority (FCA) said today.

The FCA has been looking into how easy it is for customers to cancel Continuous Payment Authorities (CPAs) due either to payday lenders or for other regular payments such as subscriptions or gym memberships.  CPAs, which are also commonly called recurring transactions or recurring payments, are relatively easy to set up but can be hard to cancel, causing problems for consumers trying to manage their finances. The issue has also been a concern for consumers, consumer groups, and the media.

Now, following the FCA review of how the largest high street banks and mutuals process requests to cancel CPAs, they have agreed that they will ensure that when a customer asks for a recurring payment to end - that will be sufficient to cancel the arrangement.  They have also confirmed that should a payment go through by mistake following cancellation by a customer the customer will be refunded immediately.

The FCA noted that, particularly in relation to payday loans, some banks and mutuals were not cancelling CPAs when asked to do so.  However banks and mutuals must cancel a payment themselves and not require their customer to contact the merchant to cancel the CPA. 

In addition to securing this commitment, the largest banks and mutuals have agreed to review every individual complaint they have received about the non-cancellation of a CPA and to pay redress where payments have continued to be made despite the customer cancelling the arrangement. This applies to all complaints since November 2009 when the Financial Services Authority (FSA), the FCA’s predecessor, began regulating banking conduct.

In this way the FCA is putting the interests of consumers at the heart of a process many of them will use on a frequent basis. The FCA is committed to protecting their rights and getting meaningful outcomes.

Clive Adamson, the FCA’s director of supervision, said:

"Recently we secured an agreement for banks to use a same day re-try process, and this is another example of improvements we are making to customers’ experience of their everyday banking.

"It’s important that consumers are confident that banks are meeting their everyday banking needs.  Today customers can be confident that when they ask for a Continuous Payment Authority to be cancelled – it will be cancelled - and that it can be done easily. 

"We recognise that historically this is an area where some customers have struggled but the banks and mutuals have responded positively to our work on this issue. From now on we expect them to be getting this right. In addition, they have committed to review past complaints. 

"We have also been talking to organisations like Citizens Advice to understand how this affects consumers and have worked with the firms concerned to achieve improvements.  Today’s announcement will give consumers more control over their finances and expenses."

Customers can generally cancel a CPA with the merchant as well as with their bank, although they are still responsible for any money they owe.  The FSA became responsible for the rules around cancelling CPAs in November 2009 with the introduction of the Payment Service Regulations; under the rules banks must cancel any CPA so long as properly instructed to do so by the customer.

The FCA has further information on its website about consumers’ rights in relation to bank accounts.

Notes to Editors

  1. The FCA assessed firms’ processes and procedures in mid-2012 and followed this in early 2013 by testing outcomes for consumers who had asked their bank to cancel a CPA.
  2. The FCA has worked with approximately 90% of the debit card market and a number of major credit card issuers on this issue - first looking at processes and procedures and then customer outcomes.
  3. By 2012 most banks tested had processes and procedures that confirmed a customer’s right to cancel with them.  However there were some inconsistencies in the actions that banks took following cancellation notices and therefore some consumers would not have been able to stop a CPA with their bank.
  4. When the FCA tested individual outcomes in early 2013, of approximately 40,000 notifications assessed, around 70% were found to result in a successful stop.  Where a cancellation notice did not result in a successful stop most firms provided a refund.
  5. The FCA noted cases of customers not getting a refund if a payment was made and cases of customers being unable to stop payments to payday lenders.  Where the FCA found these instances it intervened to ensure that the banks involved changed their processes.  Customers of these banks should now be able to stop payments to payday lenders and receive refunds if payments are taken after cancellation notices.
  6. Payments of over £7.5 billion are made each year through CPAs with each transaction worth on average £45; for payday loans the average is £80.
  7. In June the FCA reached an agreement with the UK’s high street banks to use a same day ‘retry system’ when processing Direct Debits, standing orders and future dated bill payments.
  8. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  9. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  10. Find out more information about the FCA, as well as how it is different to the PRA.