The Financial Conduct Authority had been looking into how easy it is for customers to cancel Continuous Payment Authorities (CPAs) due either to payday lenders or for other regular payments such as subscriptions or gym memberships. 

CPAs, which are also commonly called recurring transactions or recurring payments, are relatively easy to set up but can be hard to cancel, causing problems for consumers trying to manage their finances. The issue has also been a concern for consumers, consumer groups, and the media.

Following the review of how the largest high street banks and mutuals process requests to cancel CPAs, they have agreed that they will ensure that when a customer asks for a recurring payment to end – that will be sufficient to cancel the arrangement.

They have also confirmed that should a payment go through by mistake following cancellation by a customer the customer will be refunded immediately.

The FCA noted that, particularly in relation to payday loans, some banks and mutuals were not cancelling CPAs when asked to do so. However banks and mutuals must cancel a payment themselves and not require their customer to contact the merchant to cancel the CPA.

Clive Adamson, the FCA’s director of supervision, said: “It’s important that consumers are confident that banks are meeting their everyday banking needs.

Today customers can be confident that when they ask for a Continuous Payment Authority to be cancelled – it will be cancelled – and that it can be done easily.”

In addition to securing this commitment, the largest banks and mutuals have agreed to review every individual complaint they have received about the non-cancellation of a CPA and to pay redress where payments have continued to be made despite the customer cancelling the arrangement.

This applies to all complaints since November 2009 when the Financial Services Authority (FSA), the FCA’s predecessor, began regulating banking conduct.

Customers can generally cancel a CPA with the merchant as well as with their bank, although they are still responsible for any money they owe.

The FCA also announced earlier this month that seven of the UK’s biggest high street banks have committed to use a same day retry system when processing direct debits, standing orders and future dated bill payments.

The move is expected to save consumers £200m a year in late payments caused by missing funds in bank accounts at the time outgoing payments are made.