Offering discount for continuous credit card authority

cr1mson

My son's swimming lessons are switching to continuous credit card authority for payment. You can opt out but then you are charged more £20 per term. Anyone know if they are allowed to do this? I am guessing answer is yes but just wanted to check.

Am reluctant to sign up as feel don't know enough about the company in terms of its financial health.

Thanks in advance for any advice.

C

Fruit_and_Nut_Case

I'm not 100% sure but I suspect they can specify any method they like, just as you are free to accept or decline.

You are right to be wary, though. Continuous authorities can be a pain to stop and you don't have the same safeguards that you get with a Direct Debit. But you probably know that.

I hope it all works out for you and your son, whatever decision you take.

chattychappy

They are probably doing this because it simply saves them the hassle of forever chasing people for money.

I wouldn't worry at all. For DDs, the banks talk alot about the "direct debit guarantee", but that doesn't stop them going wrong and your having the hassle of sorting them out. CCs are governed by the consumer credit legislation.

With DDs, banks say they will return any money wrongly taken. With continuous payment authorities, no money is taken from you until you have paid your credit card bill. It's a credit transaction.

But the main difference is that you can't cancel a continuous payment authority (CPA) by just telling the CC. You must tell the merchant that you are cancelling the authority. Then, if anything goes through you can dispute in the usual way. This still applies if you have cancelled the credit card or it has expired in the meantime.

Alot of people get into trouble with CPAs because they didn't realise that they were entering into such a transaction, or they think it will die when they cancel their CC. Endless threads from people complaining about insurance policies, card protection plans renewing subscriptions.

With a CPA, the transaction just appears on the monthly statement in the usual way. You then get up to 56 days interest free credit (if you pay in full) during which time you can check it and pay. With a DD it just goes out of your current account.

When you sign, make sure it is clear exactly what you are authorising - ie how much, how often, and whether there is an expiry for the authority.

I've never signed a DD. I don't like the principle of someone dipping into my current account. I've signed a number of CPAs and never had a problem. But I would only sign one when it's clear who I'm dealing with, what the authority covers, and how to cancel.

chattychappy

Forgot your other point.

Yes, they are allowed to do this.

The exception would be if you had already entered into a contract with them and then they tried to force this upon you once it had started. Eg if you'd signed up for 10 lessons in advance on the basis you pay by credit card each time. Then they couldn't at lesson 5 say you must now pay the extra or sign a CPA.

david39

Personally, if I had the doubts that you seem to have (and probably I would if I was not sure about the pedigree of the organisation concerned), then I would tell them that I was not prepared to sign any form of electronic payment scheme and, unless they pass on the same discount to you, you will look elsewhere.

Point out that the cost of invoicing you for payment in the normal way compared with the cost of electronic collection cannot support a difference of £20 per transaction.

Perhaps they might compromise on a £5 difference.

chattychappy

I knew a manager of a fitness centre. They had the same kind of deal, but the difference was huge. She said it was simple - with DD/CPA, people often stopped coming but never cancelled their membership. People who didn't sign a DD/CPA never made this mistake. So they discounted DDers/CPAers heavily knowing that they would probably get more revenue in the long term.

She didn't see this has dishonest as people could cancel at any time. Apparently the scam with some of these places is to sign you up to auto-renewing membership periods, ie if you don't cancel during December you get another whole year whether you like it or not.

I know it used to work like that in the cable TV business too. Churn is lower for DDers/CPAers.

Perhaps that is part of the rationale with the swimming lessons.

JasX

Only other angle you'd have on it is are they breachine Mastercard or Visa's Merchant Ts and Cs, somethign they're more hot on in the states and have websites to report merchants who breach specific Merchant Ts & Cs.

would have to check if there was anthing Mc / Visa have against it first and follow up with them (or threaten to follow up with them) if you find a non-compliance

JasX

EDIT: see http://www.mastercard.com/us/merchant/pdf/BM-Entire_Manual_public.pdf

Page 117 Sec 5.11.2 Charges to Cardholders

A Merchant must not directly or indirectly require any Cardholder to pay a
surcharge ............... in connection with a Transaction.

1. A surcharge is any fee charged in connection with a Transaction that is not
charged if another payment method is used.

Also

A Merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used, or as the Corporation [Mastercard] has expressly permitted in writing.

Not entirely sure if that'll catch them in this case or not -most rules tend to be biased TOWARDS encouraging people to use cards but on the face of it should work in reverse?, something to check directly with Mastercard (the processing company not YOUR bank).

If the club gets threatened with not being able to process CC transactions from beraking Mastercard's rules they should come round

chattychappy

JasX wrote: »

would have to check if there was anthing Mc / Visa have against it first and follow up with them (or threaten to follow up with them) if you find a non-compliance

Good point, but the merchant agreements I've seen have no such restriction. Sometimes they prohibit the merchant charging more for credit card acceptance over other means of payment. In the UK, such a term is unenforceable to the extent the premium covers the merchant's extra costs in accepting a CC.

chexum

My concern would be that a CPA payment is not really a payment method separate from credit card payment. If they provide a discount, what they are really paying is the right to charge without giving the card details once more, not for a new payment method.

Although I don't really like it, I'd accept that if I'm aware of the terms and consequences *why* is the payment lower this way, it's a fair game. What I don't like is the hoops to jump through to cancel future payments - I'd like to see them provide the means to cancel the payment just as easily as it was registered. If I signed up for a service by ticking a few boxes, I should not have the burden to call/fax, or even email them to cancel the payments.

david39

You can't catch them on violating the card regulations by surcharging - they are not surcharging the credit card holder - they are offering a discount.