direct debits chargeable to credit cards
Does anyone know why it is not possible to cancel a direct debit mandate set up on a credit card account by instructing the credit card company accordingly? Instead it is necessary to contact the supplying company (ie the company which supplies the goods/services for which the dd is paid) and then hope that they choose/remember to action one's instruction. With a dd chargeable to a bank account the bank will always action an account holder's request to cancel a dd mandate. This inconsistency leaves credit card customers wide open to financial loss.
catmando Sat 09/08/08 06:14
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Because you have not set up a direct debit., so direct debit rules do not apply. You have set up a 'continuous payment authority'
As you know a direct debit is an instruction to your bank to allow x to claim a payment every month.
With a credit card you set up a 'continuous payment authority' with the credit card company itself, which gives the company the right to take funds from your current account until you tell them to stop.
Your bank cannot stop it.
Discussed here:
http://forums.moneysavingexpert.com/showthread .html?t=256
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Question Author
Thanks Ethyl - I am grateful to you for your comments and the link. However, the question still remains as to why it is not possible for a credit card holder to instruct the card-issuing company (eg Visa/Mastercard etc) not to allow further debits to the card a/c from, say, Company X. With a dd one can instruct one's bank not to allow further debits to one's current account from, say, Company Y. I appreciate that with credit cards it is called a continuous payment authority but surely the purpose and effect are exactly the same as with a dd.
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The purpose and effect may be similar but DDs and CPAs are totally different and that is blatantly apparent by their regulation (or lack thereof).
DDs are covered by the Direct Debit Guarantee Scheme, whereas CPAs are part of simple contract law - your contract is to make regular payments to the supplier of goods/services and if either party breaches the contract then the recourse is to sue under contract law. What would be the legal basis for a third party (the card provider) to interfere with this contract?
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The purpose is the same with one major difference.
You instruct your bank to set up a direct debit to company x.
You give company y the continuous payment authority which allows them to take a credit card payment at monthly (or any period) intervals.
You have not instructed your credit card company to make the continuous payments. The contractual relationship is between you and the company, not between you and the credit card company.
It is very well explained here:
http://news.bbc.co.uk/1/hi/programmes/moneybox /2099270.stm
Sorry to use links so much, but the professionals explain it so much better than me.
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Question Author
Thanks again Ethel and thanks Kempie. I now get the point which has bothered me for a long time. I'm surprised that cancelling a card account doesn't do the trick (see Ethel's second link) and wonder if Visa/Mastercard et al would continue to charge a card that was 'maxed out'? I'm also surprised that the press and public opinion hasn't got some official action to remedy this anomaly before now. It's clearly been an issue for many years. At the very least people should be made more aware of the potential problems before they agree to CPAs. Thanks again for your answers.
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If you wish to cancel a Continuous Payment Authority, you should always write to the company concerned, or follow up a telephone cancellation with a letter sent by recorded post, just for your peace of mind.
In the unlikely event they don't act upon the letter, you should immediately open up a dispute with your card issuer, and explain that you withdrew consent for them to continue to charge your card.
They should credit the money back into your account immediately while they investigate with the retailer (although this may depend on the card issuer). If it is a monthly subscription, you may have to continue to dispute individual transactions until the matter is resolved, which can take time.
You're right about the lack of controls though, and it shouldn't be the cardholder who needs to do the running around.
What happens, by the way, is the retailer simply enters a charge in the normal way. There is nothing to say it is part of a CPA, so your card issuer don't really have any opportunity to review the transaction. They could probably set up some kind of system whereby you could report a problem retailer and block payments to them specifically, but I'm not aware of such a system being run by any card issuer or scheme.
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In its 2006 Code of Best Practice, APACS makes mention of the card schemes working on ways to enable the cancellation of a recurring transaction through your credit card company, the final implementation date for which was planned to be April 2007 - 16 months later and not much evidence of that having come to pass!
http://www.apacs.org.uk/resources_publications /documents/BPG2006Section11-RecurringTransacti ons.pdf
Until CPAs are scrapped for a better alternative (hello again Direct Debit!) it is the case that cardholders are the only party who must do the running around since the card issuer has no legal authority to interfere with the contract between retailer and purchaser - their current role being to continue payments to the retailer and possibly offer equivalent refunds to the cardholder until such time as the original contract can be proven to be void.
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