New rules over recurrent payments

GymThe trading watchdog has announced new rules for firms who sign customers up to recurring payments for services such as insurance and gym membership, amid concerns that customers may be misled about their rights.

The new set of principles are for continuous payment authorities (CPAs), which are also used to collect renewal payments for services such as mobile and broadband, magazine subscriptions, dating websites and payday lending.

The Office of Fair Trading (OFT) recently carried out a sweep of 24 unnamed businesses to make sure they are meeting consumer protection laws and said it will write to all of them to ensure they comply with the principles.

The sweep uncovered signs that traders are not making it clear to customers that they are being signed up to a CPA, or that they have cancellation rights, the OFT said.

A CPA is a type of automatic payment set up using a debit or credit card and works in a similar way to a direct debit, with consumers giving a firm permission to take a series of payments on their card.

However, CPAs do not have the same guarantees that direct debits have regarding the date of a payment or the amount, meaning that customers should keep a close eye on their bank statements to make sure that payments are in line with what they were expecting.

Customers can cancel a CPA by telling their bank or their card provider that permission for the payments has been stopped and the OFT also advises that they should tell the company which has been taking the payment.

The new principles pull together some existing regulations as well as rules which are considered best practice. A spokesman for the OFT said that in the first instance, the watchdog would like to see the firms comply with the rules voluntarily, but added: "We will be monitoring the situation."

The principles state that companies must not automatically assume that the customer has given their permission for a CPA to be set up and they must make sure that they have their informed consent.

Any alternative payment options should also be made clear, as well as information about how to cancel a CPA and customers should be given adequate notice of changes to the timing of payments or the amount. Cancellation requests should be responded to promptly, and no obstacles should be put in a customer's way, according to the principles.
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