Consumers fret over debit orders
A quick search on Twitter for your bank and the word “debit” will lead you to a host of complaints from customers who claim money was taken from their accounts because of unauthorised debit orders. The issue flared up again last week.
Siphelele Sikhakhane had several dubious transactions on his account and said that, when he queried this at an Absa branch, he was told there were “a lot of people who had reported similar transactions”.
Sello Mabet, who banks with FNB, said he realised late last Friday that several unknown debit orders had come off his account. “I was going through my statement and then I realised that, no, I don’t know this money. There were three debit orders of R109, R99 and R289. “It’s a lot of money,” he said.
He phoned the bank to try to reverse the transactions but he was put on hold for more than 20 minutes and he could not get through on two other occasions.
Capitec client Jack Mthembu, who is a gardener, said he received SMS notifications that amounts of R119 and R139 had been taken from his account.
“When I checked I was thinking it’s my salary, but when checked I saw that it’s two debit orders,” he said.
When he raised the issue with Capitec, the bank said it was not responsible but, “why, if I go to the bank and ask them [how this happened], same time they reverse the money, if it wasn’t them?” he asked.
Walter Volker, the chief executive of the Payments Association of South Africa, said they had not noticed an unusually large number of issues related to unauthorised debit orders last week.
“There were system issues noted, but they would not contribute towards an increase in unauthorised debit orders,” he said.
But it appears that disputes are on the rise. Recently the association recorded a 31% rise in electronic funds transfer (EFT) disputes from 2016 to 2017, and disputes about non-authenticated early debit orders increased by 44% in the same period. With a non-authenticated order a customer must give written or audio permission for it to be processed; the account holder’s card and pin are not used for authentication.
Volker says the increase can also be attributed to a more focused approach to investigating and identifying rogue entities based on customer complaints.
“Prior to this, we would randomly select cases from the disputes to investigate, which resulted in a lower count of cases of no mandate being identified,” said Volker.
The association’s investigations this year found 2 265 cases in which debit orders were issued without authority, amounting to more than R2.9-million worth of penalties.
Volker said more than a million debit orders are disputed every month, both authorised and unauthorised. He said in some instances these were not because of fraudulent transactions but because customers were trying to “manage” money during tough times.
EFT debit orders are processed later in the day, usually after business hours. But non-authenticated early debit orders are processed immediately after midnight after money is credited into a person’s account, such as a salary.
“A [non-authenticated early debit order] is more prone to debit order abuse as it is part of [the] early window and is closer to salary payment dates,” Volker said.
According to the association, when rogue entities are involved, the unauthorised debits are triggered because of identity theft.
This means a rogue entity has somehow managed to access sensitive consumer data and debits their accounts.
Banks take little responsibility for these fraudulent debit orders because they act only as a payment mechanism. A debit order agreement happens between a bank’s client and the service provider.
The ombud for banking services, Reana Steyn, said banks were only required to check for “apparent” authorisation before processing a debit order. For example, this could be the client’s signature on the authorisation to debit form.
A voice recording in which the terms of agreement are outlined with the consumer, who then gives explicit authorisation for their account to be debited, also qualifies as authorisation.
“The banks are not generally expected to act as a court in deciding on disputed signatures, services not provided or any other dispute between the user and the client,” she said.
It’s up to the client and whoever is debiting the account to settle their disputes in court or by other methods.
Consumers who notice unauthorised debit orders are encouraged to go to their bank branches to have them reversed. Some banks allow users to reverse and stop debit orders under R200 on their digital banking platforms. But this should be done within 40 days and they might be charged, depending on the bank. For example, Standard Bank doesn’t charge for reversals but Capitec charges a R30 penalty fee.
Debit orders should also be cancelled with the service provider in writing. This should be presented to the bank so that the mandate is cancelled and the entity is not allowed to re-present the debit order.
But an instruction to stop a debit order only lasts for a limited time, usually from three to six months. Thereafter unscrupulous companies might successfully debit your account again using different amounts and references.
Companies found to be abusing the debit order system can be put on an offenders list and removed from the national payments system by the association and fined R1 000 for every unauthorised order.
This is not always successful as “company names are changed and in some instances and the directors are different but related to the rogue entities, making it difficult to prevent these rogue entities from carrying out their activities,” said Volker
Volker said in some cases the company debiting an account may not be a rogue entity. “It could also be a ‘good’ company with bad operational procedures, resulting in mandates being lost,” he said.
The banks did not answer specific questions about recent consumer complaints. But Standard Bank spokesperson Ross Linstrom said the bank is concerned about unauthorised debit orders, and these are “receiving their full attention”.
The payments association is piloting a new system called DebiCheck to authenticate debit orders and combat illegal transactions. Despite teething problems, it will be phased in over the next two years.
Ryan Prozesky, the chief executive of FNB consumer core banking, said it “will provide a needed breakthrough for the industry in addressing and effectively reducing this type of fraud”.
DebiCheck gives consumers control over their money by asking them to verify new debit orders electronically before they are processed.
Under this system, banks will have an electronic record of the debit order information confirmed by consumers and will check it before a debit order is processed. The bank will not process DebiCheck debit orders if they differ from the conditions confirmed by the consumer.
Tebogo Tshwane is an Adamela Trust trainee financial reporter at the Mail & Guardian