Lenders using CPAs to exploit consumers

Hard-up consumers are being exploited by payday lenders who drain their bank accounts using continuous payment authorities (CPAs).

Money is often taken without permission or warning and sometimes even after loans have been paid off, according to evidence gathered by Citizens Advice.

The charity reckons nine out of 10 payday loan customers who complain about CPAs could have grounds to claim unfair treatment.

Citizens Advice chief executive Gillian Guy said: "People can feel powerless when unscrupulous payday lenders use CPAs to run amok in their bank accounts. Now we're reminding consumers that they can fight back.

"If you've been badly treated, and the lender hasn't put right their mistake, then you can complain to the Financial Services Ombudsman."

The problem stems from the fact that CPAs give lenders the power to snatch money from people's bank accounts.

Many lenders use them if borrowers are late with payments. But such actions are unscrupulous and leave vulnerable people unable to pay for food, rent or other basic necessities.

Consumers have the right to cancel CPAs before payment is taken, but many who try are passed between banks and lenders, both claiming that they can do nothing to stop the money from coming out. Last November, the Office of Fair Trading accused payday lenders of misusing continuous payment authorities and told firms "we will not accept its misuse".

But in July – after evidence emerged of gyms misusing CPAs to take money out of former members' accounts – the City watchdog ruled that banks and mutuals must cancel a payment themselves and not require their customer to contact the merchant or lender to cancel.