CONC 7.6 Exercise of continuous payment authority

A firm should not:

1. (1)

   request a payment service provider to make a payment from the customer's payment account1 unless:

   1. (a)
      1. (i)

         the amount of the payment (or the basis on which payments may be taken) is specified in or permitted by the credit agreement or P2P agreement; and

      2. (ii)

         the amount of the payment (or the basis on which payments may be taken) was referred to in the adequate explanation required by CONC 4.6.2 R; or

   2. (b)

      the firm has complied in relation to such a request with CONC 7.6.1R (2);

2. (2)

   request a payment service provider to make a payment to recover default fees or other sums unless:

   1. (a)
      1. (i)

         the amount (or the basis on which default fees or other sums may be taken) is specified in the credit agreement or P2P agreement; and

      2. (ii)

         the amount (or the basis on which default fees or other sums may be taken) was referred to in the adequate explanation required by CONC 4.6.2 R; or

   2. (b)

      the firm has complied in relation to such a request with CONC 7.6.1R (2);

3. (3)

   other than where CONC 7.6.14R (2) applies, request a payment service provider to make a payment from the customer's payment account1 of an amount that is less than the amount due at the time of the request, unless the firm:

   1. (a)
      1. (i)

         is permitted to do so by the credit agreement or P2P agreement; and

      2. (ii)

         the adequate explanation required by CONC 4.6.2 R indicated that part payment (a sum due which is less than the full sum due at the time the firm's payment request is made) could be requested if the full amount was not available and specified the basis on which and the frequency with which such requests for payment could be made and any minimum amount or percentage that would be requested; or

   2. (b)

      the firm has complied in relation to such a request with CONC 7.6.1R (2).

4. (4)

   request a payment service provider to make a payment from the customer's payment account1 before the due date of payment as specified in the credit agreement or P2P agreement, unless the firm has complied with CONC 7.6.1R (2);

5. (5)

   request a payment service provider to make a payment from the customer's payment account1 after the due date on a date, or within a period, or with a frequency other than as specified in the credit agreement or P2P agreement and referred to in the adequate explanation, unless the1 firm has complied with CONC 7.6.1R (2);

6. (6)

   request a payment service provider to make a payment from the payment account1 of a third party other than as specifically agreed with the third party or agreed with the customer following the third party’s confirmation to the firm that the third party consents to the arrangement.

[Note: paragraph 3.9mi of DCG]

1. (1)

   2Where a regulated credit agreement or a P2P agreement does not incorporate the terms of a continuous payment authority, CONC 7.6.2AR enables a continuous payment authority to be put in place (for example, for a repayment plan) without necessarily requiring an amendment to the agreement. But CONC 7.6.2AR applies only where the customer is in or approaching arrears or in3 default, and the creation of the continuous payment authority supports the fair treatment of the customer and facilitates the exercise of forbearance (see CONC 7.3.4R and CONC 7.3.5G).

2. (2)

   CONC 7.6.2AR also permits a continuous payment authority to be granted to a debt collector, provided that the debt collector is acting under an arrangement with a lender or a person who has permission to carry on the activity of operating an electronic system in relation to lending, such that a payment to the debt collector is treated as a payment to the lender, and the requirements of CONC 7.6.2AR(3) are met.

3. (3)

   CONC 7.6.2AR is subject to the rule in CONC 7.6.12R which restricts firms to two requests under a continuous payment authority for a sum due for high-cost short-term credit.

4. (4)

   Whether a forbearance that involves the creation of a continuous payment authority amounts to an agreement that varies or supplements a regulated credit agreement (rather than merely an indulgence to the customer) will depend on the circumstances. If there is an agreement that varies or supplements a regulated credit agreement, section 82(2) of the CCA requires it to be documented as a modifying agreement and CONC 4.6.3R applies instead of CONC 7.6.2AR. Firms should note the possibility that a P2P agreement may be a regulated credit agreement.

Whether exercising rights under a continuous payment authority is reasonable, proportionate and not excessive (as regards the frequency or period of collection attempts), will depend on the circumstances, including:

1. (1)

   whether the firm is aware or has reason to believe that the customer is in actual or potential financial difficulties which the exercise of rights under a continuous payment authority may exacerbate; and

2. (2)

   whether the customer has been notified of the failure to collect the payment and has responded to contact from the firm.

[Note: paragraph 3.9mii of DCG]

A firm is likely to contravene CONC 7.6.3 R if it:

1. (1)

   requests a payment service provider to make a payment from the customer's payment account1 before income or other funds may reasonably be expected to reach the account; for example, this is likely to be relevant where a firm is aware of the customer's salary payment date; or

2. (2)

   requests a payment service provider to make a payment from the customer's payment account1 where it has reason to believe that there are insufficient funds in the account or that taking the payment would leave insufficient funds for priority debts3 or other essential living expenses (such as in relation to a mortgage, rent, council tax, food bills or utility bills); or

3. (3)

   requests a payment service provider to make a part payment (a sum due which less than the full sum due at the time the firm's payment request is made) of the sum due from the customer's payment account1 before it has made reasonable attempts to collect the full payment of the sum due on the due date; or

4. (4)

   continues to exercise its rights under the continuous payment authority for an unreasonable period after the payment due date without taking steps to establish the reason for the payment failure.

   [Note: paragraph 3.9mii of DCG]

Where permissible, a firm should only make a reasonable number of payment requests to a payment service provider to collect a part payment (a sum due which is less than the full sum due at the time the firm's payment request is made) from the customer's payment account1, having regard to the possibility that the customer may be in financial difficulties.

[Note: paragraph 3.9mii (box) of DCG]

1. (1)

   If a firm becomes aware that a customer is in financial difficulties, the firm should reassess the payment arrangement and should consider reasonable proposals to revise the payment schedule and alternative repayment arrangements.

   [Note: paragraph 3.9mii (box) of DCG]

2. (2)

   Where a customer informs a firm of being in financial difficulties, pending receipt of evidence to that effect, a firm should consider suspending exercise of its rights under a continuous payment authority.

In the FCA's view, a firm's inability to recover the whole of the amount due by the end of the next working day after the date on which it was due would indicate that the customer may be experiencing financial difficulties. In such a case, a firm should suspend exercising its rights under the continuous payment authority until it has made reasonable efforts to contact the customer to establish the reason why payment was unsuccessful and whether the customer is in financial difficulties.

[Note: paragraph 3.9mii (box) of DCG]

If the firm and the customer have agreed an alternative payment date as a contingency option if payment is not available on the due date, the firm should suspend the exercise of its rights under the continuous payment authority after the due date, and again after the alternative payment date (if the firm is unable to recover the amount due at the end of that day) and make reasonable efforts (in accordance with CONC 7.6.9 G) to contact the customer to establish the reason why payment was unsuccessful and whether the customer is in financial difficulties.

[Note: paragraph 3.9mii (box) of DCG]

If reasonable efforts to contact the customer are unsuccessful or a customer refuses to engage with the firm and there is no further evidence of financial difficulties, any subsequent exercise of its rights under the continuous payment authority should be reasonable and not excessive, having regard to the possibility that an unresponsive customer may nevertheless be in financial difficulties and that a customer who was not in financial difficulties at the time of contact may subsequently be in financial difficulties.

[Note: paragraph 3.9mii (box) of DCG]

1. (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. (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. (3)

   Firms are reminded of their record-keeping obligations under SYSC 9.1.1 R and SYSC 9.1.1AR4 (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.

1. (1)

   2Paragraph (2) applies where a guarantor has provided a guarantee or an indemnity (or both) in respect of high-cost short-term credit. (See CONC 7.1.4R for the meanings of “guarantor” and “guarantee”.)

2. (2)

   CONC 7.6.12R and CONC 7.6.13R apply to a continuous payment authority granted by the borrower and to a continuous payment authority granted by a guarantor separately. This means that the firm may make up to two requests for payment under a continuous payment authority granted by the borrower and, if those requests are unsuccessful, up to two requests for payment under a continuous payment authority granted by the guarantor.