Rogue debit orders raise bank customers' ire
"Please understand that all banks are third parties when it comes to debit orders and as such we cannot simply stop them."
FNB's Twitter persona, RB Jacobs, has posted that statement repeatedly recently in response to a stream of tweets by irate customers about unauthorised debit orders.
"Please understand that we are discussing the large number of unauthorised debit orders you have suspiciously allowed," @_Zanie shot back two days after Christmas. "Care to explain why the entire country was plagued with those R95-R125 debit orders? I had to fight off 9 in total."
The bank's Twitter responses persisted in referring affected clients to the companies actioning those debit orders: "If the company doesn't remove you from their system or you cannot get hold of them, please report them to the authorities."
58, 560 is the number of debit orders disputed by consumers each month in SA
Rogue debit orders are a massive problem in South Africa, with syndicates getting their hands on lists of consumer names and their bank account details and then processing thousands of debit orders on those accounts - usually for less than R100 as criminals attempt to avoid detection.
FNB notifies customers via SMS of debit orders being actioned on their accounts, giving them the option to dispute them, as does Capitec. This possibly creates the impression those banks are targeted more than others.
Walter Volker, CEO of the Payments Association of South Africa, says debit order disputes are increasing. "No debit order may be processed without a valid mandate - a signed contract or voice recording," he says.
But banks don't have records of those consents on their systems.
"Therefore, unauthorised debit orders that are processed are not the fault of the consumer's bank - they are simply acting on instructions given to them by collecting companies. The obligation to prove that a valid mandate exists lies with the collecting company."
But that's not to say that banks can wash their hands of the problem when a client reports an unauthorised debit order.
The Code of Banking Practice encourages a client to report a debit order dispute to their bank, which should reverse an unauthorised debit order.
"In doing so, the bank is obliged to handle the debit order dispute in accordance with the applicable Payments Association of South Africa rules," the code says.
• 36.6 million is the "normal" debit orders processed in SA via EFT every month
• R66 billion is the value of those debit orders
In essence, a bank is required to reverse a debit order if a client disputes it within 40 days. After that period, it must ask for proof of the mandate.
But Pasa says that while its rules do make provision for banks to "facilitate" debit order disputes at an interbank level, "the manner in which banks deal with their customers is not within Pasa's mandate".
FNB's CEO of consumer core banking, Ryan Prozesky, did not respond directly to questions about the social media complaints about debit orders.
But he acknowledges that a "spate of debit order fraud [is] currently impacting the industry".
"FNB customers are notified via SMS every time a new debit order is raised on their accounts for the first time, regardless of the amount, and if they believe it to be unauthorised, they have the ability to dispute and reverse it by replying to the message or logging on to one of FNB's digital platforms," says Prozesky.
"Given that the majority of unauthorised debit orders are for less than R100 - traditionally the value below which SMS notifications were not sent - this gives customers full visibility of all their monthly debit orders."
FNB allows customers to use its digital platforms to stop, dispute and reverse debit orders for less than R200 that they believe are unauthorised. But debit orders for more than R200 can only be disputed at FNB branches.
There's an unfortunate flip side to the disputed debit order story. Customers are known to dispute valid debit orders in a bid to avoid their financial commitments.
Pasa says: "We do not have a statistical view of the breakdown between real fraud and bad consumer behaviour, as far as disputes go. From the queries we receive and our investigations, we see more disputed debit orders that do actually have valid mandates than actual fraudulent ones. However, remember, most of the disputes are handled by the banks themselves."
Debit orders made safe and simple
The Payments Association of South Africa is piloting a new system, DebiCheck, which it says is fair and secure for banks, their clients, and the companies they do business with.
DebiCheck requires you to authenticate a new debit order before it is processed for the first time - via SMS - protecting you from rogue debit orders.
And payment-dodging consumers won't easily be able to dispute such debit orders, as their banks will have their authentication on file.
If a bank receives an instruction to debit its customer's account, and the DebiCheck debit order information cannot be found on its system, or doesn't match, the order will not be processed.
DebiCheck makes provision for scheduled increases, like annual subscription increases or interest rate- related increases. Consumers will need to confirm upfront that such increases may be applied.
FNB's CEO of consumer core banking, Ryan Prozesky, says FNB believes DebiCheck will provide a necessary "breakthrough" in addressing and reducing debit-order fraud.
A few companies are already using DebiCheck in its pilot phase and is expected to be fully rolled out by February next year.
"We expect its use to become more prevalent after July, as the project starts ramping up and more companies become involved," says Pasa CEO Walter Volker.