Banks deny customers' rights over payment cancellations

Two of the UK's biggest banks have admitted denying some customers their right to cancel recurring payments.

Customers seeking to cancel continuous payment authorities (CPAs) have been told by banks such as Lloyds TSB and Santander that only the payee can agree such action.

But since 2009, banks have been legally required to cancel CPAs when a customer asks.

Customer guidance from Lloyds and Santander did not reflect this.

The new rights were enshrined in the Payment Services Regulations, which came into force in November 2009, but have been subject to ongoing discussions between the banks and the Financial Services Authority (FSA).

Mike Dailly, a consumer lawyer at the Govan Law Centre, who also sits on the FSA's Consumer Panel, told Radio 4's Money Box programme that the obligations for banks were clear.

"You have the right to cancel one of these continuous payment authorities and you can go to your bank, they can't put up any hurdles," he said.

"They should have simple procedure for you to do that. You don't have to have the permission of the payee."

Customers denied rights

But in practice, some bank customers are being denied this right.

Howard Fisher, from Surrey, heard about the new rules, and checked the terms and conditions of his bank account with Lloyds TSB.

The bank told him only the company receiving the payment could authorise a cancellation, and so Mr Fisher made a complaint to the bank, outlining the new FSA regulations.

A month later, Mr Fisher received a reply from Lloyds TSB, responding to his complaint, which said: "We cannot comment on the Financial Services Authority's policies however we can provide advice on our own policy.

"Any payment of this nature will be authorised unless cancelled by the merchant. Any disputes should be taken up with the merchant."

In the light of the FSA's rule change, Mr Fisher felt this response was extraordinary: "They're effectively saying that the FSA's rules don't apply to them."

Mr Fisher is now considering taking his complaint to the Financial Ombudsman Service.

Mr Dailly said he has experienced the same problem when trying to help a client who banks with Bank of Scotland, also now part of the Lloyds Banking Group:

"I can think of a case of a pay-day loan company where the consumer was paying that through one of the government schemes yet the pay-day loan company is still taking money from the person's account.

"Now that person went to the Bank of Scotland and asked for them to cancel the CPA and they said 'You can't do it. You need to get the permission of the pay-day loan company.' Now, that's wrong in law."

'Wrongly advised'

When Money Box contacted Lloyds TSB, it said it was the bank's policy to cancel a recurring transaction if a customer requests it:

In a statement, Lloyds TSB said: "We apologise that there have been occasions recently where the guidance we have given customers has not reflected our policy. We will be communicating the correct procedures to all colleagues as a matter of urgency.

"We are aware that the current terms and conditions for a number of our products do not reflect our policy on recurring transactions; however we can confirm that these will be updated in due course."

Radio 4's Money Box asked other banks about their policy on cancelling payments.

Barclays and Royal Bank of Scotland both said customers can cancel continuous payment authorities through them.

HSBC initially said customers could not, but then clarified its position in a statement: "Customers' reasons for cancelling a continuous payment vary and as such we deal with requests to cancel an authority on a case by case basis.

"If customer asks us to cancel an authority, we can write to the retailer's bank and request that no further payments are sent, and if they are, we will immediately refund them to the customer."

Santander has admitted some of its customer have been wrongly advised that they cannot do this, but it has also taken steps to rectify this.

"We are aware that there have been instances when customers have contacted us to request the cancellation of a CPA on their account and they have been asked to contact the company they are paying," the bank told the BBC.

"As a result, staff across the business have received guidance about FSA regulations pertaining to CPAs."

Money Box is broadcast on Saturdays at 12:00 BST on BBC Radio 4 and repeated on Sundays at 21:00 BST.

You can listen again via the Radio 4 website or by downloading Money Box podcast.

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