We all know bills can be hard to keep track of – especially with the rise of subscription-based services like Netflix, Amazon Prime and Spotify. It’s all too easy to sign up with companies like these and lose track.
Continuous payment authority (CPA) has become an increasingly common way for companies to process customer payments, essentially granting companies to take payment from your credit or debit card on a recurring basis.
In this guide we will break down everything you need to know about CPAs – how they work, how to manage them, and what to watch out for.
- What is a continuous payment authority?
- How to identify a CPA on your bank statement
- What are CPAs most commonly used for?
- What is the difference between a CPA, a direct debit and a standing order?
- How do you set up a CPA?
- Can I stop a CPA?
- How to cancel a CPA: step by step
- Does a CPA affect credit score?
- What happens to my CPA if I change bank account?
- Key takeaways
What is a continuous payment authority?
A continuous payment authority (CPA) is a type of recurring payment that gives a merchant permission to take money from your debit or credit card whenever they believe it’s owed.
Unlike direct debits or standing orders, which are set up through your bank, CPAs are agreements made directly with the merchant. This means the company has your card details and can charge the agreed amount as required.
The merchant is required to get the customer’s permission – known as ‘standing authority’ – in order to take payments whenever they become due. This means the company holds your card account information and can charge the agreed amount as required.
CPA payments are often used for subscriptions, such as gym memberships or streaming services, and don’t always follow a fixed schedule – meaning payments might be taken at different times.
How to identify a CPA on your bank statement
Continuous payment authorities can also be referred to as recurring card payments, recurring transactions, regular card payments or continuous payments.
A clear initial way to identify a CPA is that the company will request your credit or debit card number (the 16-digit number on your card) instead of your bank account number and sort code.
Continuous payment authorities can be tricky to keep track of, since they’re not explicitly listed as CPA transactions on your bank statements. To identify CPAs, review your statements for recurring debit transactions. If they aren’t marked as direct debits (DD) or standing orders (SO), they are likely CPAs.
On a credit card statement, any regular payment will be a CPA, as this is the only type of recurring payment processed via credit cards.
What are continuous payment authorities most commonly used for?
CPAs are used by businesses across a wide array of services. Some examples include:
- Subscription services.
- Annual car insurance policies.
- Mobile and TV streaming services e.g. Netflix, Amazon Prime or Disney Plus.
- Payday loan repayments.
- Gym memberships.
- Debt collection companies.
- Newspaper and magazine subscriptions.
- Premium mobile app service plans e.g. Spotify Premium, LinkedIn Premium or YouTube Premium.
What is the difference between a continuous payment authority, a direct debit and a standing order?
Continuous payment authorities (CPAs), direct debits and standing orders are all ways to make recurring payments, but they work differently:
Continuous Payment Authority (CPA)
- This is linked to your debit or credit card, authorising a company to take payments whenever they believe they are due.
- Payment amounts can vary, such as with repaying payday lenders, where the total may change based on interest or repayment terms.
- Unlike direct debits, CPAs don’t always follow a fixed schedule, and they don’t have the same level of consumer protection.
- You can cancel CPAs either through the company or with your bank. If funds are withdrawn without your authorization, you can still request a refund, but you must contact the company first.
Direct Debit
- This is set up through your bank account, where you authorize a company to take fixed payments on a scheduled basis.
- This agreement is made through a contract called a ‘direct debit mandate’.
- The company must notify you of any changes, and you’re protected by the direct debit guarantee, which ensures refunds from your bank if errors occur – meaning you don’t have to depend on the company for repayment.
Standing order
- A regular payment that you set up with your bank to transfer a fixed amount of money to another account (an individual or company) on a specified date. For example, a standing order could be used to ensure rent is regularly paid to your landlord on time.
- Standing orders can be cancelled any time through your banking app, or by contacting your bank.
Essentially, direct debits offer more control and security, standing orders provide consistency for fixed payments, while CPAs provide flexibility but require careful monitoring.
How do you set up a continuous payment authority?
Continuous payment authorities can be set up online, in person, or over the phone. Instead of providing bank details, which are typically required for direct debits, the customer authorises the merchant by sharing their debit or credit card details, using the 16-digit number found on the card.
The payment date and amount may vary each month, depending on the terms you’ve agreed upon with the company.
While reputable companies should clearly outline your commitment and adhere to an agreed payment schedule, you should always check the terms and conditions and make sure you understand the payment terms.
Can I stop a continuous payment authority?
Yes – as the consumer you have the legal right to cancel a continuous payment authority at any time. Even if the company refuses, your bank is required to stop them on your behalf.
How to cancel a CPA: step by step
1. Contact the company taking recurring payments
The best approach is to start by reaching out to the company and requesting that they stop taking further payments. You can usually do this online by email, or over the phone. Most legitimate businesses will comply with this.
However, if you’re locked into a contract – such as an annual gym membership – consider the consequences before pursuing cancellation. You may need to find another way to settle the payment to avoid breaching the agreement.
Remember that you remain responsible for any debts owed to the company even after you cancel a continuous payment authority.
If you aren’t contractually obligated, you can formally dispute the transaction by phone or in writing. Ideally, the company may decide to close the account rather than contesting the dispute.
2. Ask your bank or credit card provider if it becomes necessary
If the company refuses to cooperate, you can contact your bank or credit card provider to stop the payments. According to the Financial Conduct Authority (FCA), banks are required to cancel a CPA upon request.
While you could skip step 1 and go straight to your bank or credit card provider, it’s generally advisable to contact the company first, as outstanding balances may still need to be addressed.
3. If your bank fails to act
FCA regulations also state that banks must refund payments if they failed to cancel a CPA when asked. If charges continue despite your request, you should notify your bank – they are legally required to reimburse the full amount.
For example, if your £30/month gym membership subscription continued for three months after cancellation, your bank must refund £90, plus any interest incurred – such as credit card interest on unpaid balances.
Does a CPA affect credit score?
While a continuous payment authority (CPA) itself doesn’t directly impact your credit score, how you manage it can have repercussions – here’s how:
Missed or late payments
If a CPA is linked to a credit card and payments aren’t made on time, it could lead to late fees and negatively affect your credit score.
Overdraft usage
If a CPA causes your bank account to go into overdraft, it might signal financial strain, which could impact your credit score.
Debt accumulation
If you rely on CPAs for recurring payments but struggle to keep up, it could increase your overall debt, affecting your ability to borrow in the future.
What happens to my continuous payment authority if I change bank account?
Unlike direct debits and standing orders, continuous payment authorities won’t automatically transfer to your new account when you switch bank accounts.
You are responsible for reaching out to the company and updating your payment details to ensure payments continue and avoid missing any.
What happens to my continuous payment authority if my card expires?
If your card expires, your continuous payment authority (CPA) won’t automatically transfer to a new card. The payments may be declined unless you update your details with the company or your bank. Some banks may attempt to carry over CPAs to a replacement card, but it’s always best to check and ensure your payment method is up to date.
Can continuous payment authorities be taken out on both debit cards and credit cards?
CPAs can be set up on both debit and credit cards. Any recurring payment charged to a credit card is automatically a CPA, as credit cards don’t support other types of recurring transactions.
Continuous payment authorities: key takeaways
- A continuous payment authority (CPA) allows a company to take recurring payments directly from a credit or debit card, linked to the customer’s card account.
- Unlike direct debits or standing orders, which are managed by your bank, CPAs are agreements directly with merchants, meaning they hold your card details.
- Unlike direct debits, CPAs do not benefit from the direct debit guarantee, meaning consumer protections are more limited.
- You have the legal right to cancel recurring payments at any time. You can cancel directly with the company or through your bank, who must stop payments immediately upon your request.
- If further payments continue after cancellation, these are considered unauthorised transactions and must be refunded without unnecessary delay.
- Payment services regulations outlined by the FCA require companies to obtain the customer’s informed agreement before setting up a CPA and to comply with relevant laws.
- If a company is incorrectly refusing to cancel recurring payments from your CPA or making repeated attempts to take payments, you can escalate your complaint to the financial ombudsman service.
- CPAs can be used for a variety of services, including payday lenders, insurance premiums, gym memberships, and more.
- It is important to regularly check your account statement or next statement to monitor for any unauthorised payments.
- If you change your bank account or your card expires, CPAs do not automatically transfer, so you must update your debit card details accordingly.
- If you encounter issues, visiting a bank branch or contacting your card issuer promptly can help resolve problems with CPAs.
- Building societies and card issuers are all subject to payment services regulations to ensure fair treatment of customers in CPA matters.
How Howden can help
Through our strong relationships with selected insurers, we can help you find the right policy for your needs. Whether you’re looking for home insurance, contents insurance, or gadget and possessions insurance, speak to our team today. We’ll not only help to save you money but will ensure all your valuables are properly protected.
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