A Continuous Payment Authority (CPA) is where you give a business permission to regularly take money from your debit or credit card whenever they think they’re owed money. Often magazine subscriptions and gym memberships use this method of payment.
A CPA is different from a standing order or Direct Debit because the payment instruction is with the business, not with a bank. This gives them more flexibility in taking money from your account – they can charge fixed or varying amounts, and they don’t have to specify a date when they’re going to take a payment.
However, customers who give a Continuous Payment Authority do not enjoy the same rights as those who use Direct Debits.
This method of payment is set up by you giving your debit or credit card details to a service provider to which you wish to make a regular payment. This can be done over the phone, in person or online.
You can cancel a CPA by informing the service provider you have instructed. The bank may not be able to cancel or reverse a Continuous Payment Authority. Whatever payment service you select, the service provider or the bank will collect payment from the account which you identify. If the account has insufficient funds or is blocked (by a court order, for example), not only will the transaction fail but you are also likely to be charged a fee by your bank. If more money is going out than is coming in, the account will show a debtor balance for the customer. This means that the bank has lent the customer the sums used to make payments and this resulted in an overdraft. The bank applies a debtor interest rate on the sums lent (see section on LOANS).