Banks told to pay up for not cancelling payments to lenders
As many as 30,000 people could be in line for compensation payments if their banks failed to cancel continuous payment authorities used by payday lenders and gyms.
CPAs are set up using credit or debit cards and allow companies to take payments on dates of their choosing for different amounts. They are extremely easy to set up, often requiring just a phone call, but have proved equally as tough to cancel.
CPAs have proved particularly controversial recently after it emerged some customers of payday loans companies have tried and failed to get them cancelled after approaching their card issuers.
Some customers were told they had to contact payday loans companies to get the CPA cancelled.
But yesterday the Financial Conduct Authority said customers should be able to shut them down upon contacting their banks.
“The FCA noted that, particularly in relation to payday loans, some banks and mutuals were not cancelling CPAs when asked to do so,” the watchdog said.
“However, banks and mutuals must cancel a payment themselves and not require their customer to contact the merchant to cancel the CPA.”
Banks and building societies will now have to review every individual complaint they have received about the non-cancellation of a CPA.
They will have to pay redress where payments have continued to be made despite the customer cancelling the arrangement. The review applies to all complaints since November 2009 when the Financial Services Authority, the FCA’s predecessor, began regulating banking conduct.
The announcement comes a day after the Office of Fair Trading referred the payday loans industry to the Competition Commission, after finding “deep-rooted problems with the industry”. The OFT’s chief executive Clive Maxwell said firms were profiting from making “unaffordable loans that can’t be repaid on time, which is causing financial loss and distress to some people”.
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