Following reports last week surrounding the growing issue of ‘mystery debit orders’, Justmoney looked at the bank’s role and processes in protecting the consumer.
According to a Fin24 article: “Banks in South Africa process about 56 million debit orders a month and from these close to a million inter-bank debit orders, including non-authenticated early debit orders, are disputed every month, according to the Payments Association of South Africa (PASA).
“The dispute ratio for non-authenticated debit orders is between 4.5% and 6%. Some of these include debit order fraud. “
Debit order disputes are common and can be based on a number of reasons such as, the debit amount is incorrect, the date of the debit is incorrect, the beneficiary listed is unknown or incorrect and most frequently there is no authority to debit (this could be as a result of fraudulent activity).
What is a debit order?
“You may use debit orders as a means of payment for a range of services. A debit order is an instruction by you to a third party (including a bank) to allow that third party to collect a payment from your account on a regular basis (e.g. monthly or annually). You can choose whether it will be a fixed amount (e.g. a loan repayment) or a variable amount (e.g. monthly cell phone charges).
“Authority for the debit order can be given in paper form or by using your debit card and PIN, if your bank allows for it. In exceptional cases voice mandates may be given to the third party provided that it is followed up by written confirmation from you within the stipulated period,” stated the Ombudsman for banking services.
Who may use the debit order system?
The Payment Association of South Africa (PASA) is responsible for the debit order system, “as it is recognised by the banking industry and the South African Reserve Bank (SARB) as the official, self-regulated Payment System Management Body,” explained the Ombudsman.
Under the regulations of PASA, any organisation is privy to the debit order system, granted they receive approval from their bank, the ‘sponsoring bank’.
“A contract between the organisation (which is then known as a user) and the sponsoring bank is then signed. This contract aligns with the PASA rules,” highlighted the Ombudsman.
Furthermore, a user must have written consent from the customer before any transactions can be made.
While there is provision for users to use voice-recorded consent (under certain circumstances), the user is required to follow up in confirming the agreement and gaining written authorisation within the space of 30 days.
FNB
“The National Payment System (NPS) participants are continuously improving safeguards for paying customers within the debit order space including enhancing authentication for using the debit order system, as well as the imposition of sanctions where these safeguards are transgressed,” said spokesperson Ryan Prozesky, CEO of value banking solutions at First National Bank (FNB).
FNB also boasts a number of services that supports the customer in disputing, stopping or reversing debit orders conveniently.
“Currently customers can reverse unauthorised debit orders and refund their accounts almost immediately, if they ask for assistance within 40 days from debit occurring at a branch or via the FNB call centre,” said Prozesky.
FNB customers can stop a debit order using any one of the FNB electronic platforms; online banking, app banking, cellphone banking and making use of the call centre facility.
“Customers receive an SMS if we identify a debit order that could potentially be unauthorised, regardless of the amount. No fees are charged when a customer reverses an unauthorised debit order,” explained Prozesky.
Nedbank
The following are the guideline procedures Nedbank follows when fraudulent debit order activity is picked up:
-A client can give Nedbank a written stop payment instruction to prevent a debit order being processed on their account for a period of three months.
-When a payment on a debit order has been stopped on the instruction of a client the user may not process further debits to the client under the system. If such a debit order is received, it will be returned to the originator.
-After the expiry of three months, the future debit orders may be processed to the account unless if the client has renewed the stop payment for a further three month period.
-It is important that clients check their statements regularly for debits which they did not authorise.
Standard Bank
“The bank has no control over the debit order system, and merely acts as a payment mechanism where such debit order(s) get presented for payment. The onus is on the accountholder to regularly scrutinise his/her account statements and bring to the bank’s attention any such unauthorised entry,” highlighted a Standard Bank spokesperson.
Like the other banks, there is a process regarding the reporting and reversing of any illegal debit order, which needs to be done in person at the nearest Standard Bank branch.
The customer then has to dispute an unauthorised debit order within 40 days. A dispute form needs to be completed at the branch which confirms that the customer is giving the bank consent to do the reversal.
Absa
At Absa customers that have fallen victim to debit fraud are encouraged to report the incident at their nearest bank branch, and if the suspected fraud has been confirmed by the bank a case should be opened with the police.
“Debit orders disputed within 40 days of the transaction are reversed immediately. For disputes lodged after 40 days, the collecting bank is allowed 30 days to provide a written mandate otherwise the transaction is also reversed automatically,” said Marius de la Rey, chief executive of customer channels and distribution at Absa.
If there is a failure by the collector to adhere to the instruction to stop the collection, the customer can perform a stop payment either by going to their branch or via Internet Banking.
“The banking industry and regulators are currently working on a solution where the pre-authentication of all collections will be the standard procedure. This will be a global first in addressing the issue of unauthorised debits,” said de la Rey.
Despite current regulation and rules requiring legal consent forms at bank level, customers are still falling victim to debit order scams daily. Consumers are thus to check their bank statements regularly for any irregular transactions or deductions.