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A major investigation by a British newspaper has found that many banks, insurance companies and utility providers are giving customers the wrong information about their rights when it comes to cancelling auto renewal annual payments for their products.
Millions of Britons pay for things like car, home or travel insurance; breakdown cover; subscriptions; and even gym memberships by direct debit or standing order. But millions of others enter into so-called auto renewal “continuous payment authorities” – which are also called recurring payments – to pay for these services. These payments are set up using either a credit or debit card. This means you are authorising the service provider to take the payments for the service directly and without notifying you of its intention to do so.
Many companies – the major high street banks included – have apparently told customers that once a continuous payment has been authorised neither they nor the customer concerned can cancel it. They say that this can only be done by the business which is taking the money. This, however, is wholly inaccurate.
In reality, any consumer can go directly to the financial provider and demand that an auto renewal payment is cancelled. This fact has been reiterated by the Financial Services Authority which says:
Your bank or card issuer must then stop them – it has no right to insist you agree this first with the company taking the payments.
An investigation by The Guardian found that thousands of people had been conned by a free face cream trial. This locked them in to continuous payments of £70 a month on their credit and debit cards. Another inquiry discovered that thousands of customers of major and trusted companies (including the AA and O2) had money still being taken from their cards after they had cancelled the service.
Some of the worst instances of abuse of the auto renewal/recurring payments system have come from companies based outside the UK. There have been reports of hundreds of thousands of people signing up online to what they thought was a free trial only to find money being taken off their card every month thereafter. No way was provided to contact the business concerned to get these payments cancelled.
While the banks claim that they have cleaned up their acts, there is no substitute for staying safe by avoiding these authorities altogether. Most reputable companies will offer alternative ways of paying for a service so you should try to:
You have a legal right to do this and companies are obliged under FSA rules to comply.
These auto renewal agreements may sound convenient but it also means that you deny yourself the opportunity of renegotiating the monthly or annual fee. Consider your car insurance for example. It’s generally accepted that the best way of keeping your premium down is to shop around each year as you approach your renewal. Insurers have a habit of discounting the first year to lure you in and then radically increasing the premium thereafter. Locking yourself in by agreeing to auto renewal gives the insurer the upper hand – don’t do this! Stay flexible and simply renew on a year by year basis. You’ll save a fortune.
Oliver Jones has written for Solution Loans since 2015. His passion for personal finance comes through in the 150+ blog posts he's written since that time. His talent for explaining all things money means he's covered topics as diverse as...Read about Oliver Jones
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