Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk
16 August 2018

What is a Continuous Payment Authority?

You may have heard about a Continuous Payment Authority, also known as a CPA when it comes to the payment method concerning different types of short-term loans such as payday loans and others, but what exactly does it mean and how does it work in practice? Prior to considering setting up a Continuous Payment Authority, it is very important that you are fully aware of how this collection method works.

A CPA is a way for banks and a number of different lenders to collect funds from a customer’s debit account on the agreed repayment date between the customer and lender in a quick and efficient manner. They are also known as ‘recurring payments’ and tend to be commonly used by payday and short term loans lenders.

How Does a Continuous Payment Authority Work?

The process of continuous payment authority by banks and lenders typically works as follows:

  • Once a customer has made an application for credit, the debit card they have put in their application is ‘tokenised’ by the lender. This means that the lender will usually take a very small amount out of the account in question (usually around 10p) as a way of verifying the card details; that it belongs to the person applying for credit and also to ensure that taking out future repayments in the future is possible. After this confirmation stage is over, the 10p is usually swiftly returned to the owners account
  • Once this stage has been carried out, the card details are now logged onto the lenders system
  • It is now possible for the lender to automatically take out payments from the debit account when they are due
  • When it comes to collecting the money, the lender will usually need to pay a fee for using CPA


Is a Continuous Payment Authority Safe?

Yes, this is because if a lender wants to be able to continue to be in business, they have to abide by the Financial Conduct Authority’s (FCA) strict regulatory guidelines that are in place to ensure that lenders abide by good practices and treat their customers fairly. If lenders abuse this power, they risk heavy fines from the FCA, and even being shut down completely.

The Difference Between a Continuous Payment Authority and a Direct Debit

There are various differences between a direct debit and a continuous payment authority. You might notice certain similarities with direct debits when it comes to how continuous payment authorities work. With a direct debit for example, it is the consumer who sets up the payment process and has the ability to remove it at any point.

On the other hand, CPAs are set up by the lender, and it isn’t possible for customers to just cancel it in the same way they would with a direct debit through online banking. The process of amending the payment authority is different and is not as simple as contacting one’s bank to stop payments.

Why is a Continuous Payment Authority Used?

There a range of reasons as to why this type of collection method is preferred by lenders. This is mostly due to it being a convenient as well as practical way to ensure that repayments are made promptly each month by customers. It tends to be far more scalable too, as lenders do not have to manually collect money from thousands of customers each month.

It is also a time-saving strategy for customers and lenders. For example, as the repayment amount is taken out automatically each month, there is no need for the customer to spend precious time ringing up the lender on a monthly basis in order to sort out the payment over the phone, or set it up manually through online banking. It also avoids customers forgetting about payments, therefore accruing late payment charges too.

Is it Possible to Cancel a Continuous Payment Authority?

Yes, if you have a continuous payment authority set up on your account, it is possible for you to cancel it at any point. You may perhaps just want to do this for one particular month (for example, because you have encountered a financial emergency which means that another expense is more pressing at this moment in time, and you don’t want the lender automatically debiting the money from your account that month.) The main thing you need to be aware of is that you will not be able to cancel this yourself manually.

You will need to get in contact with either your bank or lender directly in order to get them to cancel the continuous payment authority on your behalf. If however, you are struggling to make repayments, you may be referred to a debt management company by the lender to help with your financial problems.

If you find yourself in a situation where you have requested for a CPA to be cancelled and this has not been carried out, you should contact your card issuer for a refund, or contact the Financial Ombudsman Service in order to make a complaint about unauthorised payments.

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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk