Traders may be misleading consumers by not making it clear they have signed up to regular card payments, or that these can be cancelled, the Office of Fair Trading says.

The OFT will contact firms to ensure they play by the rules after it found websites were not making customers' rights clear.

A continuous payment authority (CPA), as these transactions are officially known, is where you give a firm the long number on your credit or debit card for it to take regular payments.

They're often used for vehicle breakdown services, insurance policies, gym memberships, online dating and magazine subscriptions.

The OFT will contact 24 firms in these sectors, although it hasn't stated which ones they are.

By law, you can cancel a CPA via the retailer, or your bank or building society.

The OFT insists firms must:

  • Be fully transparent about terms before a consumer signs a CPA arrangement.
  • Ensure the consumer has actively given consent to a CPA, not just given them a form where they have to opt out.
  • Provide adequate notice of any changes to a CPA, such as the amount or timing of payments.
  • Provide clear and prominent information on how to cancel a CPA.

It's not just traders that have been in trouble on this issue. Banks have also been caught giving wrong advice.

A Consumer Focus mystery shopping survey of nine major banks carried out earlier this year found almost half of advisers (44%) gave the wrong answer or couldn't give an answer when asked how to cancel a CPA.

Some 28% of customers were told they could only take up their query with the company that set up the agreement, contrary to Financial Services Authority rules.

A CPA should not be confused with a direct debit, where you give a business your sort code and account number for it to take payments. These can be cancelled much more easily by simply deleting the direct debit 'mandate' from your current account settings.

Jason Freeman, legal director in the OFT's goods and consumer group, says: "Continuous payment authorities, used properly, provide convenience for consumers and clarity about their commitments.

"However businesses must make clear to customers what they're signing up for, when payments will be taken, and how they can cancel. Where they do not, businesses face the risk of enforcement action."

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