If you do not live in the UK, then skip this article, it is not for you – If you do, then keep going.
The Horror Story
First, lets highlight the primary horror story that has brought this into the public domain spotlight. Thousands of women in Britain – and many more across the globe – were conned by an ad for “free trials” of creams that promised to rejuvenate the skin but, instead, left them several hundred pounds out of pocket – and mired in a battle to stop even more money leaving their accounts. The Guardian reported …
Back in October last year, Money was the first newspaper to raise concern about Perfect Radiance. We featured the case of BK, from London, who signed up to the “free” trial of Perfect Radiance. She agreed to pay £4.95 for postage. Two months on, she found her bank account had been debited for £79.95. When she rang to contest the payments, she was told to go to the company’s website and examine the terms and conditions. These stated: “By placing my order, I agree to the terms of offer, which explain that I must cancel within 12 days of today to avoid enrolment in monthly delivery program, which ships fresh supply for £74.95 each month.”
Along with thousands of others, she’d unwittingly signed up to a recurring payment authority, which unlike direct debits, are payments that are notoriously hard to stop.
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At issue is how difficult it is for a customer to cancel payments. Emails and calls to the firm’s far eastern and US calls centres go unanswered, and the charges to buyers’ accounts soon start piling up.
A recurring payment authority (also known as a continuous payment) is not the same as a direct debit. The major problem is the way it can be cancelled. Most banks tell you that it can only be stopped by the company you set it up with. And if you can’t get hold of it, it can carry on accessing your card.
Some customers have received a helpful response from their bank but most have not. In the main, the banks have taken the view that the customer willingly agreed to the terms and must bear the consequences.
There is a lot of confusion over the situation with recurring payments. The UK Cards Association, which represents the payments industry, told Money that in the past only the company that had set up the recurring payment could cancel it.
In other words, sign up for a free sample, agree to pay the postage and given them your card details to do so, and there buried in tiny small print is a statement that says that unless you contact them within 14 days, they will start sending you monthly deliveries and debit your account for it. Once you realize what has happened, then this company, located outside the UK in the US, mysteriously fails to prove contactable and keeps hitting your account every month. The victims pleas to their banks fell upon deaf ears, the banks insisted, “Not our problem, you agreed to this”.
Now the facts – Your rights as a consumer
The FSA Guidance clearly states … (Bottom of the page)
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.
In other words, if your bank takes a hard line with you regarding canceling a Continuous payments authority, then point then at the FSA guidance. If they still refuse to help, then go directly to the Financial Ombudsman Service here and get them to help, they are the official independent experts in settling complaints between consumers and businesses providing financial services.
As you have this dialog with your bank / card issuer, please do not be rude or abusive, you will win no help that way. Be polite, the person on the other end is not trying to con you, they simply don’t know. Once things are clarified you will find they can then help.
Link to FSA Guidance: Its near the bottom of the page here : – http://www.fsa.gov.uk/consumerinformation/product_news/banking/know_your_rights/payments
Myths and Facts
Here is the problem, quite a few of the folks who generally do give good advice have got this horrendously wrong.
Office of Fair Trading “In order to cancel a continuous payment authority, an approach must be made in the first instance to the creditor who holds the authority (rather than the bank from which monies are to be paid – as would be the case with a direct debit) and there is, therefore, no automatic right to cancel.”
Wrong! You are not required to first approach the company taking the payments. You have the right to cancel them directly with your bank or card company.
Lloyds TSB “We [ie, the bank] cannot cancel a purchase once you have given your consent to make the payment to a retailer (you will need to contact the retailer separately). This includes payments made on a regular basis using your card, such as magazine subscriptions.”
Wrong! The bank or card company must cancel regular payments once you have told them you have withdrawn permission.
MoneySavingExpert website “They used to be called a ‘continuous payment authority’ but whatever the name, they’re hideous for one big, bold reason: You can’t cancel them. Only the company you’re paying can. This means that if you want to end a subscription and can’t contact it, or fall into dispute, there’s little that can be done to stop it without huge effort.”
Wrong! The bank can cancel it, but to be fair, their online guide to recurring payments is closer to the truth when it says: “Ask the retailer to. If it won’t, you’ve a right to get your bank to stop it.”
Sorting this out – A Suggested Strategy
So if you do indeed have one of these things and need to cancel, I suggest the following strategy
- Start with the company taking the payment. Most will of course oblige and cancel.
- If you are unable to contact them, or if they simply refuse … contact your bank and explain that you have stopped permission for the payments.
- If the bank refuses to assist, point out the FSA guidance that clearly states they must
- If the bank still refuses, contact the Financial Ombudsman Service