If a payday loan company is constantly trying to deduct money from your bank account, you may unknowingly be the victim of an unscrupulous debt collection tactic known as continuous payment authority.
Unfortunately for the payday loan companies, they are not allowed to constantly attempt to collect payments day after day until they have made every possible attempt to contact you regarding the loan.
The customer charter that is published by the trade bodies of the payday loan sector openly states that the members of the association will make a concerted effort to clearly define continuous payment authority and the rights of individuals to cancel this often unbearable authority while they determine if this method of repayment is right for them.
The charter also claims that you will be contacted by your lender via phone, letter, text, or email at least three days prior to their attempts to recover the payments they are owed using continuous payment authority.
The Office of Fair Trading provides guidance and educates consumers on which states lenders are not allowed to seek payment by continuous payment authority when they have reason to believe that a customer has insufficient funds in their account, or that deducting the funds from their account will leave them unable to pay essential living expenses and priority debts.
Lenders should also not constantly try to use continuous payment authority after they have been told that you are suffering financial hardships and are unable to repay the loan.
Unless your payday lender has made every possible attempt to contact you, they are not allowed to constantly try to collect the debt in full or partial payments each and every day.
However, if you fail to reply to your lender, and they do not have direct evidence that you are suffering financial difficulties, they are allowed to use continuous payment authority to secure the unpaid debt. So, if you know that you cannot repay a loan, you should speak to your lender as soon as possible.
If you believe you are being unfairly treated by your lender throughout the process, you can file a complaint or take the matter up with the Financial Ombudsman Service.
If you come to the decision that you have dealt with continuous payment authority enough and decide to cancel it, you can contact the payday loan company or card provider. Best of all, either of them must take action by honouring your request. However, it is advisable that you contact both parties and provide them plenty of notice.
Always get your cancellation in writing, serving as proof that the correspondence took place. You will also want to keep a copy of the contract if you need proof of the amount you agreed to pay or the original payment arrangement.
Thanks to the Payment Services Regulations 2009, financial providers are required to cancel any currently existing recurring payments. If your card provider will not deal with the issue, you can always refer to Payment Services 2009 to tilt their hand.
If your card provider is still unwilling to resolve the dispute, send them a formal complaint letter, threatening to take the matter to the FOS if they fail to satisfactorily deal with the issue.
If more than eight weeks pass and the matter has yet to be resolved, you can take it to the FOS, who will perform a thorough and unbiased investigation.
If the continuous payment authority is not cancelled by your card provider upon your request, Payment Services Regulations 2009 allows you to ask for the refund of any additional costs that you may have incurred, such as additional interest and bank charges.
It’s important to know, however, that you are still responsible for paying the money that you originally borrowed from a lender or your card provider.
In the end, you need to contact the payday loan company and discuss a way to negotiate a new payment schedule and take care of your debt.