Sunday, 29 April 2012


UPDATE 14 August 2019
The Payment Services Regulations 2009 have been replaced by the Payment Services Regulations 2017 which re-enacts these provisions in precisely the same way but the numbers have changed, for example reg.55 is now reg.67. 

UPDATE 28 JUNE 2013 
The new regulator, the Financial Conduct Authority has stepped in to make sure banks and others follow the clear legal rules and cancel continuous payment authorities for payday loans and subscriptions. See its press release 

In the past some banks had wrongly said the rules did not apply to single payments of the sort taken by a payday loan company, even if the lender takes more than one amount from your bank account to meet that single payment. Some banks told customers they cannot cancel the payment because it is 'to a finance company'. That is nonsense. Others have said that the regulations only apply to a series of payments and these are single payments. But lawyers, and now the FCA, agree that interpretation is wrong. The payment regulations apply to all payments. 

If you agree to make a payment or series of payments on your debit or credit card you can cancel future payments by telling your bank or card provider. 

In the past just about every bank and credit card provider in the UK has told customers they cannot do that and given them  false information about their rights to cancel payments on credit and debit cards.

Those rights have existed since 1 November 2009. 

And on 28 June 2013 the Financial Conduct Authority confirmed the advice which has been given in this blog since April 2012. The FCA says:

"high street banks and mutuals process requests to cancel CPAs, they have agreed that they will ensure that when a customer asks for a recurring payment to end - that will be sufficient to cancel the arrangement.  They have also confirmed that should a payment go through by mistake following cancellation by a customer the customer will be refunded immediately."

These payments are called ‘continuous payment authorities’ or ‘recurring payments’. I will call them CPAs. They are NOT direct debits or standing orders which are regular payments from your current account and are covered by separate rules. You have always been able to stop a direct debit or standing order just by telling your bank. But until recently CPAs have been very different.

A CPA is an agreement you make with a retailer, hotel, gym, insurance company, lender or other firm providing you with a service (they are all called ‘merchants’ in the bank jargon). You give the merchant permission to take money from a credit card or a debit card. Even though the debit card money comes out of your current account it is NOT a direct debit – it is a CPA.

The agreement can be made over the phone and it allows the merchant to take money in the future off your card. You normally have no control over the amount that is taken or when – it can be any amount at any time.

In some cases these CPAs are a scam – you think you are buying one item online only to find that you are committed to paying monthly for years. In other cases payday loan companies will store your details and recover future debts using the original card details. Even subscriptions to gyms, publications or insurance premiums are taken through a CPA because the merchant believes it puts them in control of when the payment is cancelled.

In the past it has been very difficult to stop these payments. Originally CPAs could only be stopped by the merchant. If you went to your bank or card company it would say that it could do nothing and advise you to contact the merchant to stop the payment. If the merchant refused the bank or card provider would continue to allow the merchant to take your money.

That changed on 1 November 2009 when a new law came into force. It is in the Payment Services Regulations 2009. It makes it clear that your bank or card provider has to stop the payments if you ask it to do so even if the merchant refuses to cancel it or even if you have not told the merchant.

If the bank or card provider does not obey your instructions then it has to refund any subsequent payment it allows to be taken from your account. And if a subsequent payment causes you to incur any fees – such as an overdraft charge or a late payment fee – or to lose any interest, then those losses have to be refunded too.

Despite that change in the law Money Box listeners and my tweeps have reported that just about every bank and card provider in the UK has wrongly told them that they can only cancel the payment through the merchant. They include Amex, Barclays, Co-operative Bank, First Direct, Halifax, HSBC, MBNA, Lloyds, M&S, Nationwide, NatWest, Post Office, RBS, Santander, and Smile.

Some banks have even advised that the only way to stop the payment is to close the account and cut up the card. Not only is that advice wrong it may not work. Visa and Mastercard can let merchants track you and move the agreement to a card you take out in the future. It has also been known for a bank or credit card provider to try to recover the money – and penalty charges – from customers who have cancelled a card.

Some banks admit they have given customers the wrong information. Lloyds Banking Group – which includes Halifax and Bank of Scotland – has still not updated the terms and conditions on all its accounts to reflect the new law. And both Lloyds and Santander have admitted that customers have been wrongly advised.

If you want to cancel a CPA
Tell your bank or card provider that you have a CPA and name the merchant; give any other details you can such as how the payment appears on your statement and, if you know, the dates and times when the payment is normally taken. Tell the bank that you cancel that payment authority with immediate effect. Quote regulation 67 of the Payment Services Regulations 2017. And the latest release from the FCA dated 28 June 2013 

You can give this instruction on the phone, through an online message, by letter, or at a personal visit to a branch. It is best to do it in writing but always make a note of the time and date when you give the instruction.

If a payment from that merchant is taken in future, contact the bank again and say you want that money (and any penalties or losses it may have caused you to incur) refunded immediately under regulation 61.

If the bank or card provider refuses to do so, or fails to do so after eight weeks, you can take your complaint to the Financial Ombudsman Service or call 0800 023 4567 from a landline or 0300 123 9 123 from a monthly contract mobile. The FOS will most likely take your side in the dispute.

If you have told your bank to cancel a CPA in the past
If your bank or card provider has failed to act on your instructions to cancel a CPA at any time since 1 November 2009 you should be able to get back all the payments taken from your account since you gave that instruction. The bank or card provider has to refund them to you. You should also get back any penalties that the transaction led you to incur such as an overdraft charge or a late payment fee and any loss of interest.

The FCA has confirmed this in its latest statement

"the largest banks and mutuals have agreed to review every individual complaint they have received about the non-cancellation of a CPA and to pay redress where payments have continued to be made despite the customer cancelling the arrangement. This applies to all complaints since November 2009 when the Financial Services Authority (FSA), the FCA’s predecessor, began regulating banking conduct."

The rules depend on when you gave the instruction – it must always be on or after 1 November 2009 – and when the payment was made.

Payments made in the last 13 months.  
Tell the bank or card provider
·         That you gave a clear instruction to cancel the payment on a particular date (which must be 1 November 2009 or later)
·         That the payment made was after that date and was therefore unauthorised under reg.67(3) and 67(4)of the Payment Services Regulations 2017
·         That you are entitled to an immediate refund of the amount and any penalties under reg. 61
·         That the event occurred less than 13 months ago as specified in reg.59(a)

Payments taken between 1 November 2009 and 13 months ago
Tell the bank or card provider
·         That you gave a clear instruction to cancel the payment on a particular date (which must be 1 November 2009 or later)
·         That the payment was unauthorised under reg.67(3) and 67(4) of the Payment Services Regulations 2017
·         That you are entitled to redress under reg. 76
·         That under reg.92(2) the thirteen month time limit does not apply because the bank or card provider failed to give you adequate information under Part 7 of the Regulations.

You should also add that the bank or card provider has a duty to treat you fairly and to give information which is clear, fair and not misleading. When you asked it to cancel the payment it failed to explain your rights correctly thus preventing you from taking the correct action at the right time.

If the bank refuses take your case to the Financial Ombudsman Service – details above.

The law
The Payment Services Regulations 2009 implemented the EU Directive 2007/64/EC and have now been replaced by the Payment Services Regulations 2017 

The Regulations came into force on 1 November 2009. Regulation 55 covers a customer (the payer) consenting to a payment being made and withdrawing that consent. Regulation 55(3)&(4) says

“(3) The payer may withdraw its consent to a payment transaction at any time before the point at which the payment order can no longer be revoked …  (4) …the payer may withdraw its consent to the execution of a series of payment transactions at any time with the effect that any future payment transactions are not regarded as authorised for the purposes of this Part. “

Regulation 61 makes it clear that where a payment was not authorised the “provider must immediately— (a) refund the amount of the unauthorised payment transaction to the payer;
And must also (b)… restore the debited payment account to the state it would have been in had the unauthorised payment transaction not taken place.”

In other words it has to refund any penalties that have been incurred.

The time limit for a refund is set down in regulation 59 which says the customer

“59(1)…is entitled to redress under regulation 61…only if it notifies the payment service provider without undue delay, and in any event no later than 13 months after the debit date, on becoming aware of any unauthorised or incorrectly executed payment transaction.”
However 59(2) states that the 13 month limit may be waived if the provider has not given the relevant information to the customer. That information is set down in Part 5 of the Regulations.

Past FSA guidance
The Financial Services Authority issued guidance on how the Regulations should be implemented. Its latest published version is dated January 2012. Although this document makes it clear that the customer has the right to withdraw a payment at any time before it is made it does, confusingly, state that “best practice” is “for the customer to be advised that notice of the withdrawal of consent be given to the payee [merchant].”

Some banks and card providers have taken that to mean that the customer had to do that before the payment would be revoked.

But a draft version of the guidance dated May 2012 explains why it has now been changed

“with reference to the customer’s right to withdraw consent for a series of payment transactions, clarification that it is not acceptable for the payment service provider to make withdrawal of consent dependent on notice having been given to the merchant.”

And the latest version dated October 2012  repeats the same advice from the May 2012 draft in paragraph 8.132 (p79) 

“However, it is best practice for the customer to be advised that notice of the withdrawal of consent should also be given to the payee, because the PSRs. [Payment Services Regulations] do not address the payer’s underlying liability under the terms of any contract they have signed.  For the avoidance of doubt, it is not acceptable for the payment service provider to make withdrawal of consent dependent on notice having been given to the merchant.”

It also clarifies that consent can be withdrawn up to the day before the payment is due

"For future dated payments, the latest point at which the payer can revoke the payment
instruction is the close of business on the day before the payment is due to be made, or if the
payment transaction is to be made when funds are available, close of business on the day
before those funds become available."

And this clearer guidance is reflected in the information given to customers on p.15 of this document  

"Cancelling a regular card payment.
When you give your credit or debit card details to a company and authorise them to take regular payments from your account, such as for a gym membership or magazine subscription, it is known as a ‘recurring transaction’ or ‘continuous payment authority’.
These are often confused with direct debits, but do not offer the same guarantee if the amount or date of the payment changes.
In most cases, regular payments can be cancelled by telling the company taking the payments. However, you have the right to cancel them directly with your bank or card issuer by telling it that you have stopped permission for the payments. Your bank or card issuer must then stop them – it has no right to insist that you agree this first with the company taking the payments.
Be aware, though, that you will still be responsible for paying any money that you owe."

Although the banks and card providers claim to have relied on earlier FSA advice they have a duty themselves to obey the law which is clear. You can cancel a continuous payment authority on a debit or credit card simply by telling your bank or card provider. And it must act on your instruction at once.