A continuous payment authority is an automatic payment that's set up to take money from either your debit or credit card to pay one of your outgoings each month.
It’s a widely used method of meeting regular payments, and you might find it being used for outgoings such as gym subscriptions, broadband providers and particularly payday loan companies. When you set up a payment, it will be linked either to your current account if you use your debit card, or your credit card account if you set it up using your credit card.
However, your rights are quite different to what you get if you choose to set up a Direct Debit or a standing order. When you agree to a continuous payment authority, you allow the company to withdraw the cash for your payment on any date they choose, and they’re given permission to withdraw payments for different amounts each time.
How does it work?
When you set up a continuous payment authority, you’ll start by handing over either your debit or credit card details to the company or business. Usually, you’ll be able to do this in a whole manner of ways, often online, over the phone or in person.
It’s quite common to be given no written record of the agreement, so it’s worth asking them to confirm it in writing. Also, you might not be made aware of the type of payment you’re setting up, so it’s worth asking whether the payment will be taken by continuous payment authority or a Direct Debit.
Payments will be taken from your account by the company, so you may not even notice them going out if you don’t check your statements regularly.
How do I cancel a continuous payment authority?
If you want to cancel your payments, it’s a good idea to let both your bank and the company you’re paying know. Your bank must cancel the payment if you ask them to, and you are entitled to a full refund of the amount plus any late payment charges if they don’t.
Bear in mind that with many bills and subscriptions you will sign a contract or credit agreement, and in many cases you may have committed to a specific minimum number of payments. This means that although you may cancel your payment with your bank, you’ll still have to make sure to continue to pay for the remainder of the time noted in your contract. If it’s for a payday loan, it’s really important that you remember to continue to repay – the sooner you clear the balance, the better. Cancelling your payment with the bank won’t cancel the loan, and you could be hit with missed payment charges.
Things to look out for
When you set up a Direct Debit, you benefit from what’s called the “Direct Debit Guarantee Scheme”, which means you’re protected if there’s an error with the payment. On the other hand, a continuous payment authority has no such protection, so you’ll have to make sure to check your bank statement often in case the payments differ from what you were expecting.
In addition to this, once you agree to pay by continuous payment authority, it’s important to make sure you’ve got enough money in your account – or left on your credit card balance – to cover the payment when they take it. If not, you could miss the payment or go over your overdraft limit and be hit with costly charges and suffer damage to your credit history.
In many cases, it might be a better idea to set up a Direct Debit instead. Although this can take longer to set up initially, and your bank will similarly charge you if you don’t have the funds to cover your payment, you receive extra protection that isn’t present in a continuous payment authority. However, if you’re taking out a payday loan, lenders may not allow you to pay this way.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.