Posted: 25th July 2013

Andy Murray’s gym subscription seems to be paying off slightly better than most. As Wimbledon champion, with his sights on becoming world no. 1, it’s unlikely he will call up his bank to stop the payment any time soon. Had he cancelled it, however, the transaction – via Continuous Payment Authority (CPA) – might not have been halted on his request.

In recent months, it was looking as though CPAs were going to be a problem for payday lenders. Complaints figures for unsecured lenders were rising, specifically in this area. However, the Financial Conduct Authority “reminder” about firms’ obligations regarding CPAs has sent the ball flying back towards payment services providers, banks and building societies.

When customers take out an unsecured loan or pay a subscription, rather than set up a direct debit from their bank account to repay – which could incur bank charges if bounced – a CPA is often set up instead. The problem is that these CPAs have been easy to set up and hard to cancel. Firms have failed to act on the customer’s request and the account is debited further. This resulted in repeated attempts to retrieve payments as well as successful retrieval by a payday lender, for example, despite cancellation.

Firms are now aware of the FCA’s requirement going forward. However, there are many transactions in the past which were not dealt with in this manner. Therefore, the major banks and mutuals have agreed to review complaints of CPAs and redress payments that were made despite the customer’s cancellation going back to November 2009.

The FCA’s reaction is as we might expect: banks or building societies must from now on accept and process the customer’s requested CPA cancellation. Whilst this feels like a step in the right direction, there are bigger questions: some firms’ IT systems are currently not set up to identify such payments. There may be significant cost and IT system implications. In order to embed this change, staff must be retrained and developed consistently across all channels to move to the new approach. Broader lessons remain: all business decisions must consider the impact on the customer and the fairness of outcome for those customers.

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