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Businesses warned over ‘automatic’ renewal charges

Cornwall Council has welcomed the warning issued by the Office of Fair Trading to businesses using continuous payment authorities (CPAs) amid concerns that customers are not always being made aware of what they are signing up to and may be misled about their rights to cancel.

Once agreed by a customer, a CPA allows a business to take a series of payments using a customer's debit card or credit card without having to seek express authorisation for every payment. CPAs are often used to collect renewal payments for things like vehicle breakdown services, insurance policies, gym memberships, online dating, mobile and broadband services or magazine subscriptions.

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Martin Fisher, Cornwall Council Senior Trading Standards Officer explained the risks to consumers: “Continuous Payment Authorities are often confused with direct debits, but they do not offer the same guarantees. They are becoming much more common and can provide an efficient and convenient payment method for consumers. It is important, however, that where they are used customers are fully aware of the commitment they are entering into and can cancel them without difficulty should they choose.

The Trading Standards team here in Cornwall does receive complaints from consumers who feel misled by these ‘automatic’ payments and this should serve as a warning to us all to be very clear about what future payments we have agreed when ordering goods, services or insurances, particularly if the supplier is abroad.”

New advice by the Office of Fair Trading makes clear to all businesses what they need to do to ensure that they fully meet their legal responsibilities when using CPAs, including that they:

  • are fully transparent about terms before a consumer signs up to a CPA arrangement
  • ensure the consumer has given informed consent to the use of a CPA, and do not use 'opt out' provisions or other means to automatically assume the consumer has given consent
  • provide adequate notice of any changes to the scope of the agreed authority, such as the amount or timing of payments
  • provide clear and prominent information on how to cancel a CPA.

The advice has been developed after a sweep of websites where CPAs were being used. The investigation found signs that businesses are not making it clear to customers that they are being signed up to a CPA, or about their rights to cancel.

Customers are able to cancel a CPA either through the company taking the payment, or through their bank or card provider. Customers should tell the bank or card issuer that they have stopped permission for the payments. The bank or card provider has no right to insist that you agree this first with the company taking the payments, although it is good practice to also notify the company.

 

Story posted 14 December 2012

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