What are continuous payment authorities (CPAS)
A CPA, or Continuous Payment Authorities, is a recurring payment that is organised by the merchant for a customer, utilising the information on their debit or credit card.
The customer must first provide permission for the merchant to collect recurring payments, which is known as ‘standing authority’.
One of the most common types of businesses that use CPA’s are gyms, collecting your payment every month on the same day following initially getting ‘standing authority’ for future payments.
You will also find these with many other subscription based services, as well as services that require a membership with a monthly payment plan. They’re also increasingly common with payday loan companies that want to receive a payment on a set date.
It should be stated that these are different to direct debits, but I’ll go into this in just a moment.
What Is An Example Of A CPA?
I’ve already mentioned gyms, which are some of the most common CPA’s we know of, but in recent years we have seen a huge growth in businesses that use this model, such as Netflix and Amazon Prime.
Magazine and newspaper subscriptions largely work on the same basis, being the original subscription services before online versions became so popular.
How Do Continuous Payment Authorities Work?
The customer will initially provide their debit or credit card details when signing up with a website or business that runs CPA’s. The key details include the name on the card, expiry date and the 3 digit security code on the back.
The customer will have to make a transaction at the start to begin the process, which could be the month paid in advance, or with gyms they make you pay a ‘sign-up fee’ sometimes.
However, from that moment onwards, the company can repeatedly take payments from your card, not fraudulently I should add.
The amounts aren’t always consistent, for some it might be a set monthly payment, but after 12 months it might increase, or for companies such as Amazon Prime, the amount will vary drastically based on the item purchased.
If you see a CPA on your bank statement and you don’t recognise it, you can raise this with the company and if you don’t manage to resolve the situation, you can raise this with your bank.
How Do You Stop CPA’s?
The customer should have the ability to cancel the payments whenever they like, subject to the terms and conditions, via either contacting the company, or as a secondary option they can also contact the bank.
Sometimes the creditor may inadvertently use the details to take further payments, such as if they hadn’t noted the cancellation of membership. If this occurs, then the customer is within their rights to file a continuous payment authority refund with the bank or through the company, as these weren’t authorised payments.
It is worth highlighting that in the UK, the CPA to be stopped requires is one working day before the payment is due by the close of business. This means that if you cancelled on a weekend, or you cancelled on the day of the payment, then you won’t be due a refund.
How Are Continuous Payment Authorities Different To Direct Debit Payments?
With a direct debit, you setup a direct debit mandate, which is a contract stating the exact amount which will leave each month on a set date.
In contrast, a CPA can change the amount to be paid, such as if the monthly subscription service increases their rates or if you purchase a single item through your subscription on top of the regular payments.
This is also the same with standing orders, which are for a set amount on a set date, making them different for the same reasons.
The cancellation method is also slightly different, as through a CPA you will seek a refund through the company if they have taken payment without permission, whereas if this happens with a direct debit or standing order then the bank will refund you.
Open banking is an interesting alternative to CPA’s, with variable recurring payments in place through third party providers in much the same method.
These are a great option both for merchants and customers, with merchants able to take payments instantly without the high debit and credit card fees, while customers will benefit from the high level authentication process built-in helping to protect their data security.
I have mentioned a few negative aspects of CPA’s for both the merchant and the customer, so I wanted to equally highlight some of the advantages to using this system:
- CPA’s can be very useful for customers as they remove the need to remember to pay a set amount on a set date, or they mean you can skip any lengthy process of putting in your bank details each time. Remembering your payment details removes a frustrating part of the purchasing funnel, especially with many using mobile devices to order, which can be slower to input details.
- For companies such as gyms, this method allows for repeated payments from customers even if they’re not actively using their membership, which is the basis of their payment structure, as they oversell knowing most people won’t use their services heavily.
- As previously mentioned, unlike standing orders and direct debits, different amounts can be taken, meaning you can easily order via Amazon Prime for different amounts without having to go through the whole process of putting in your details.
- You have to be careful to read the terms and conditions when signing up with a company, as they may set you up on a CPA basis after a set time period and if you forget to end your subscription after this date, the regular payments may be more expensive than you’re comfortable with.
- As the CPA’s allow the companies to take payment whenever they feel it is due, this could mean money leaves your account on a day you’re not expecting it, which could leave you in financial trouble if not planning effectively.
- In something commonly known as the ‘subscription trap’, it may not be that you forgot to cancel the membership, but you may not have been fully aware of what would happen after the trial period and exactly how much money would be taken. There are many services offering 7 days, without heavily going into the costs after this period or how long you will be tied in.
- Ever lost your bank card and had to go through your gym membership and subscription services to input all your new details? It’s frustrating, but something that has to be done with CPA’s, as they can’t use your old card details. This means that a payment failure would go through if not updated in time, which could prevent you from using the service.