FCA Rules on Continuous Payment Authority

[Amethyst]

R = Rules
G = Guidance

4.6 Pre-contract disclosure: continuous payment authorities

Application

4.6.1 R (1) This section applies to:

(a) a firm with respect to consumer credit lending; or
(b) a firm with respect to consumer hiring; or
(c) a firm with respect to operating an electronic system in relationto lending in relation to a prospective borrower under a P2P agreement.

Disclosure of continuous payment authorities

4.6.2 R (1) Before entering into a regulated credit agreement or regulated consumer hire agreement, or before a P2P agreement is entered into, under which the customer may grant a continuous payment authority, the firm must provide the customer with an adequate explanation of the matters in (2).

(2) The matters referred to in (1) are:

(a) what a continuous payment authority is and how it works;

(b) how the continuous payment authority will be applied by the firm, including where the firm provides high-cost short-term credit that it may only be used twice to collect the whole sum due in relation to the agreement or where the agreement provides for repayment in instalments, in relation to an instalment;

(c) how the customer can cancel the continuous payment authority;

(d) whether alternative repayment options are available;

(e) the choice of an appropriate due date for payment;

(f) the choice of an alternative payment date (if applicable);

(g) the consequences if sufficient funds are not available on the due date (or an alternative payment date if agreed);

(h) whether further attempts may be made to collect payment and, if so, the basis on which further attempts would be made, the days or period over which the further attempts would be made and the frequency of the further attempts;

(i) other than in relation to high-cost short-term credit, whether part payment (a sum due which less than the full sum due at the time the firm’s payment request is made) may be sought and, if
so, the basis on which and frequency with which payment would be sought and whether part payments would be subject to a minimum amount or percentage;

(j) in relation to high cost short term credit, the firm will not seek part payment (a sum due which is less than the full sum due at the time the firm’s payment request is made) unless the firm is
willing to accept such less sum and, after being notified of that sum and when a payment request would be made, the customer has given express consent to the firm to make such a payment request; and

(k) whether default fees and other charges may be added and, if so, the circumstances in which these may be incurred and the amount of such fees and charges or the basis on which they will be calculated. [Note: paragraph 3.9miii of DCG]

4.6.3 R A firm must include the terms of the continuous payment authority as part of the credit agreement or consumer hire agreement presented to the customer or P2P agreement presented to the borrower. [Note: paragraph 3.9miii of DCG]

4.6.4 R A firm must set out, in plain and intelligible language, the scope of the agreed continuous payment authority and how it will operate. [Note: paragraph 3.9miii of DCG]

[Amethyst]

Re: FCA Rules on Continuous Payment Authority

Continuous payment authorities and high-cost short-term credit

CONC 7.6.12 R

01/04/2014
FCA

(1) Subject to (3) to (5), a firm must not request a payment service provider to make a payment, under a continuous payment authority, to collect (in whole or in part) a sum due for high-cost short-term credit if it has done so in connection with the same agreement for high-cost short-term credit on two previous occasions and those previous payment requests have been refused.
(2) For the purposes of (1) and (3): (a) if high-cost short-term credit has been refinanced, except in exercise of forbearance, the agreement is to be regarded as the same agreement; and
(b) "refinance" and "exercise forbearance" have the same meaning as in CONC 6.7.17 R.

(3) Where a firm exercises forbearance (a) paragraph (1) applies or continues to apply to the agreement; but
(b) any refusal of a payment request that took place before the time at which the forbearance was granted is to be disregarded for the purposes of (1).

(4) Paragraph (5) applies following the refusal of two payment requests a firm has made to a payment service provider under a continuous payment authority to collect a sum due for high-cost short-term credit, where the firm proposes to refinance the high-cost short term credit in question in accordance with CONC 6.7.17 R to CONC 6.7.23 R.
(5) If the firm contacts the customer and, in the course of an dialogue between the firm and the customer (a) the firm notifies the customer of the refusal of the payment requests;
(b) the firm reminds the customer of the matters in CONC 4.6.2 R (2), taking account of any proposed changes to the terms of the continuous payment authority that will apply following the refinance if the customer consents; and
(c) the customer gives express consent to the firm further exercising its rights under the continuous payment authority following the refinance;

the firm may then make further payment requests under the continuous payment authority following the refinance in accordance with CONC 7.6, and paragraph (1) applies as if the firm had not made a payment request under the continuous payment authority before the refinance.
(6) This rule does not apply to an agreement which provides for repayment in instalments.

[Note: Until the end of 30 June 2014, transitional provisions apply to CONC 7.6.12 R: see CONC TP 3.4]


Continuous payment authorities and high-cost short-term credit: instalment payments

CONC 7.6.13 R

01/04/2014
FCA

(1) Where(a) high-cost short-term credit provides for repayment in instalments; and
(b) a firm has on two previous occasions made a payment request, under a continuous payment authority, to collect (in whole or in part) the same instalment due under the agreement, which have been refused;

subject to (3) and (4), the firm must not make a further payment request under the continuous payment authority to collect that instalment.
(2) The firm must not make a further payment request under the continuous payment authority to collect any other instalment that is or becomes due under the agreement, unless any request is in accordance with CONC 7.6 and in the course of a dialogue between the firm and the customer (a) the firm notifies the customer of the refusal of the payment requests;
(b) repayment of the instalment referred to in (1)(b) has been made using a method other than a continuous payment authority and the customer is not in arrears; and
(c) where (a) and (b) apply, the firm has reminded the customer of the date and amount of the next instalment.

(3) If, where the prohibition in (1) applies, a firm exercises forbearance within the meaning of CONC 6.7.17 R the firm must not make a further payment request under the continuous payment authority to collect the instalment referred to in (1) or a payment request for any other instalment that is or becomes due under the agreement, unless(a) a payment request is in accordance with CONC 7.6;
(b) the firm notifies the customer of the refusal of the payment requests; and
(c) in the course of a dialogue between the firm and the customer, the firm reminds the customer of the date and amount of the next instalment and following which the customer gives express consent to further payment requests being made under the continuous payment authority.

(4) If, where the prohibition in (1) applies, a firm adds no charge or additional interest in connection with missing a payment on the due date, the firm must not make a further payment request under the continuous payment authority to collect the instalment referred to in (1) or a payment request for any other instalment that is or becomes due under the agreement, unless (a) a payment request is in accordance with CONC 7.6;
(b) the customer has missed making a payment on the due date; and
(c) in the course of a dialogue between the firm and the customer, the firm reminds the customer of the date and amount of the next instalment and following which the customer gives express consent to further payment requests being made under the continuous payment authority.


[Note: Until the end of 30 June 2014, transitional provisions apply to CONC 7.6.13 R: see CONC TP 3.5]


CONC 7.6.14
01/04/2014
FCA

(1) Subject to (2), a firm must not request a payment service provider to make a payment under a continuous payment authority to collect a sum due for high-cost short-term credit if that sum is less than the full sum due at the time the request is made.
(2) Where a firm (a) following contact with a customer, refinances the agreement in accordance with CONC 6.7.17 R to CONC 6.7.23 R by granting an indulgence which allows for one or more repayment of a reduced amount under a repayment plan;
(b) notifies the customer of the number and frequency of repayments and their amount under the repayment plan; and
(c) the customer gives express consent to the firm to make payment requests to collect the repayments notified under the plan;

[Note: Until the end of 30 June 2014, transitional provisions apply to CONC 7.6.14 R: see CONC TP 3.6]

paragraph (1) does not prevent the firm from making a payment request in accordance with CONC 7.6 under a continuous payment authority to collect repayments of those amounts in accordance with the plan.





CONC 7.6.15 G

01/04/2014
FCA
(1) CONC 7.6.12 R, CONC 7.6.13 R and CONC 7.6.14 R do not prevent a firm accepting payment (including a part payment) from a customer using a means of payment other than under a continuous payment authority. If, for example, a customer consents separately that a single payment of a specified amount may be taken on the same day or on another specified day using his or her debit card details, this is excluded from the definition of continuous payment authority.


(2) CONC 7.6.14 R does not prevent a firm from making a payment request concerning a sum due where the firm has varied an agreement so that the sum due is less than it was before the variation.

(3) Firms are reminded of their record-keeping obligations under SYSC 9.1.1 R (general rules on record-keeping) which in particular require sufficient records to be kept to ascertain that the firm has complied with all obligations with respect to customers. These should include, for example, arranging to keep records of payment requests (including refusals of payment requests) made under continuous payment authorities and to keep suitable written or other records of the consents referred to in CONC 7.6.1 R, CONC 7.6.12 R, CONC 7.6.13 R and CONC 7.6.14 R.


Cancelling a continuous payment authority

CONC 7.6.16 R

01/04/2014
FCA

A firm must not by any means improperly or unfairly inhibit or discourage a customer from cancelling a continuous payment authority including by (1) misleading the customer, expressly or by omission, regarding the right to cancel and how it may be exercised; or
(2) failing to respond promptly to requests by or on behalf of the customer to amend or cancel the continuous payment authority; or
(3) intimidating a customer who wishes to cancel the continuous payment authority; or

(4) requiring customers who wish to cancel the continuous payment authority to go through an unduly complicated process.

[Note: paragraph 3.9miv of DCG]


CONC 7.6.17
01/04/2014
FCA

A firm must cease to exercise its rights under the continuous payment authority once it is notified that the continuous payment authority has been cancelled.

[Note: paragraph 3.9miv of DCG]