What is a Continuous Payment Authority?
A payday loan continuous payment authority sometimes referred to as a CPA, is an agreement that you make with a payday loan company, granting them permission to take a recurring amount from your debit or credit card.
Payday loans are not the only companies to use continuous payment authorities as a means of collecting a recurring transaction, as most commonly, these agreements are used by streaming service providers such as Netflix, or mail order subscription services such as Amazon Prime.
Gym membership, mobile phone apps and magazine subscriptions also frequently use continuous payment authority requests as their preferred recurring payment collection method.
How does a Continuous Payment Authority work?
When a payday loan company sets up a continuous payment authority, they will use your long debit card number, as opposed to a direct debit or standing order payment which uses your sort code and account number.
Hidden within the terms and conditions of your payday loan agreement is a clause that previously allowed unlimited attempts to take money from your account, however, this has since been revised in recent times to allow companies to make only two attempts to obtain funds from you, unless you’ve agreed to rollover the balance, and these can only be for the full amount due.
What are the dangers of having Continuous Payment Authority arrangements?
Firstly, many subscription services are offered on a trial basis, which then gets deducted from an account on a regular basis after the trial period ends. Regardless of whether you used the service or not in the time you’ve been billed for.
A number of mobile apps exist that encourage trial period based subscriptions, that are not easy or straightforward to cancel. Indeed, these apps offer little in the way of a reminder that a trial period is due to end and sometimes default to annual subscriptions.
Secondly, a continuous payment authority will be taken without any prior consideration of your affordability. If you have taken out a payday loan as a short term solution to financial difficulties then you are more likely to already be within a problem debt cycle and therefore making payments to an unaffordable loan may increase your chances of then not being able to afford a priority debt such as your mortgage, rent or council tax.
Martin Lewis, also known online as the Money Saving Expert regularly writes about the need to audit our debit card transactions to monitor payments that are being deducted and not being used.
“Do I need it? Can I afford it?” or “Will I use it? Is it worth it?” is a slogan that Martin uses to encourage savvy shoppers to save money in his online articles and TV appearances..
Many people with problem debt tend to check their bank accounts less frequently and therefore are more prone to paying for goods and subscriptions they no longer own, or are subscribed to.
This may include a wider range of products such as breakdown cover for white goods and mobile phones no longer owned by the individual, but still being paid for.
How can I cancel a Continuous Payment Authority request?
You can ask your bank to stop the transaction, usually by writing to your bank directly, phoning or email.
There are templates online that you can download to cancel a continuous payment authority. It’s also worthwhile emailing your payday loan lender to let them know that you won’t be making the latest payment and making them aware that you are experiencing financial difficulties.
The cancellation deadline is close of business on the working day before the payment is to be taken but it is also advisable that you get confirmation that your request has been received and actioned by your bank.
Switching banks may be a solution that also stops a continuous payment authority from occurring. However, while switching banking providers means that many standing orders and direct debits can be automatically transferred, continuous payment authority requests are not. This is something you should consider if you pay for insurance premiums using a CPA as your insurance provider may not pay out a claim if you’re uninsured due to non-payment of insurance premiums.
If you believe that you have had a continuous payment authority payment taken without your permission, you can firstly complain to the company directly, or escalate your complaint to the Financial Ombudsman Service.
Whatever happened to Payday Loan adverts?
Many of the payday loan providers that once famously dominated our TV screens, newspapers and radio such as Wonga.com, Sunny and Quick Quid have since gone into administration and stopped trading.
Payday loan companies haven’t gone away, there are many payday loan providers still in existence, albeit with greater scrutiny on their affordable lending practices.
Payday loans have for many years been a well-known source of problem debt for many people throughout the UK for a number of years and recently, Manchester City Council have thwarted attempts at payday loan providers opening stores in disused high street locations, or local convenience stores with a commitment to preventing firms or individuals from applying for planning permission to convert convenience stores or disused offices into loan shops.
As many retail units become available on UK high streets due to a succession of lost high street retail brands, this may become an ongoing concern with Provident loans closing their doorstep lending operation also. Therefore face-to-face over-the-counter lending facilities may not always be welcomed additions to high streets if they lead to an increase in irresponsible lending.
Worried about Payday Loan debt in Scotland and need help?
If you are worried about payday loan debts, or any other debts that you have may; it is always best to seek help as soon as possible.
It is feared that more people in Scotland are turning to payday loans, and more alarmingly, loan sharks, in order to fund short term cash flow problem.
Trust Deed Scotland® offer tailored debt advice and formal debt solutions to residents of Scotland and our experienced debt advice team are well placed to help you understand what your options are, plus the pros and cons of solutions such as the Debt Arrangement Scheme (DAS) or Protected Trust Deeds, which help thousands of Scots every year to deal with their unaffordable debt and allow them to look forward to life after debt.
For confidential, non-judgemental debt advice today, contact Trust Deed Scotland® or call us on 0141 221 0999.