Wise up to rogue debit order costs
Save on fees by disputing fraudulent debit orders online
The only thing worse than having to deal with unauthorised debit orders on your bank account is being charged hefty fees by your bank to stop fraudsters from stealing your money.
FNB announced last week that it will waive the fee for stopping unauthorised debit orders when clients do so through its electronic banking channels. Ryan Prozesky, CEO of consumer core banking at FNB, says the bank is doing this to combat "the scourge of rogue debit orders impacting the industry and FNB customers".
Although the fee waived was only R5, Prozesky says the bank can no longer allow its customers to "bear the brunt" of debit order fraud. FNB is also monitoring businesses that are processing illegal debit orders on its clients' accounts and reporting them to the Payments Association of South Africa. The bank will eventually discontinue services to such businesses.
Due to the increasing volume of complaints related to unauthorised debit orders, the ombudsman for banking services said this week that it had started reporting these complaints as a separate category of complaints. "Just four years ago, these complaints were part of current accounts. Now it's a standalone item on the ombud's reporting dashboard," says ombud Reana Steyn.
An unauthorised debit order constitutes fraud. If you detect an unauthorised debit order on your account, you should contact your bank immediately. Your bank will be able to lodge a query by tracking the reference number. All participants in the payment system must comply with the rules set out by Pasa, the organisation that determines the guidelines for service providers to collect monies via debit order, Steyn says.
About twomillion debit orders are disputed every month, according to Pasa. Most disputes relate to "non-authenticated early debit orders", which are early debit orders where the mandate may be authenticated by means of a voice recording or a signature.
A non-authenticated early debit order is unlike an authenticated early debit order, which is authenticated using your bank card, which is entered into the service provider's terminal and requires your PIN. This takes place when you and the merchant conclude the agreement authorising the merchant to debit your account in future. The mandate is captured electronically and these debit orders can't be disputed.
These complaints were part of current accounts. Now it's a standalone itemReana Steyn, ombud for banking services
Disputing a non-authenticated debit order with a bank is tricky because a debit order is an agreement between you and a supplier to allow payment from your account. Your bank is not party to the agreement and can't take an instruction to cancel an agreement between you and another party.
The number of disputed debit orders in South Africa is too high, says Pasa CEO Walter Volker. This was the impetus for DebiCheck, a new system that will place the onus on banks to electronically authenticate all new debit orders with their clients.
To electronically confirm your debit order means that you confirm the details of your debit order on an electronic device such as a cellphone, personal computer or an ATM. This is done only once.
Your bank will also have to keep an electronic record of the debit order information that you have confirmed and check this before processing the debit order to your bank account. This means DebiCheck debit orders will not be processed by your bank if they are outside the conditions agreed to by you.
DebiCheck is being phased in. Volker says it will be used for debit orders processed "in the early processing window" - meaning directly after a salary run - and not for those processed later in the day. "Companies wanting to collect in the early processing window will have to use DebiCheck from October next year."
Volker says "rogue companies" are not the only ones to blame for the high number of disputed debit orders. Consumers abuse the system by disputing legitimate debit orders knowing that a valid mandate is in place. They do this when they are short of cash. DebiCheck will put a stop to this too.
How to minimise fees when disputing a debit order
Familiarise yourself with your bank's policies and the fees charged for disputing an unauthorised debit order. Some banks don't allow you to dispute a debit order online if it is for an amount of more than R200, while some banks charge clients more to dispute a debit order if it is 40 days after the fact. And some banks don't charge anything if you dispute the debit order via online banking or the bank's app.
You can dispute a debit order of any amount at no cost if you do so within 40 days and via internet banking. But the bank does not facilitate online disputes for transactions older than 40 days, says Sibusiso Ngwenya, head of pricing at Absa consumer banking.
If you go into a branch to dispute a debit order it will cost you R30 if you do so within 40 days and R145 after.
Stopping an unauthorised debit order that has yet to be processed costs R30 if you do so via internet banking, and R60 at a branch.
Should the bank find that a valid mandate is not in place, you can ask it to reverse the fees. The fee is charged when the clients lodges the dispute in the branch, Ngwenya says. "Only once a finding is made that a mandate was not in place will the fees be reversed."
Two million: The number of debit orders that are disputed each month, according to the Payments Association of South Africa
It will cost you R20 to dispute and stop a debit order if you do so within 40 days using the bank's app.
The reversal of the funds into your account is instant if the debit order was for less than R200. If you go into a branch to dispute and stop a debit order, it will cost you R40 within 40 days of the debit order being processed and R80 after.
Head of communications Charl Nel says all future blocks of the same debit order are charged at R5.30 per block.
To protect clients from companies that put through invalid debit orders, Capitec has reduced the minimum value that triggers an SMS alert from R100 to R30 so that clients are informed of smaller debit orders on their accounts.
You can dispute a non-authenticated debit order at any time, at no cost, irrespective of the amount of the debit orders, says Ryan Prozesky, CEO of consumer core banking.
But if you want to log the dispute via electronic channels, you can only do so for debit orders of less than R200. Amounts of more than R200 need to be logged via telephone banking or inside a branch, at no charge.
Debit order disputes within 40 days are reversed immediately, whereas debit orders disputed after 40 days could take up to 30 business days.
The bank reserves the right to charge a client R130 if they have wrongfully disputed a debit order older than 40 days where a valid mandate is provided from the service provider.
You can stop a debit order that has yet to be processed, at no charge, if you do so via electronic channels and the debit order is for less than R200.
For amounts of more than R200, it will cost you R18.50 via telephone banking and R55 to do so inside a branch, to stop the debit order from being processed again in future. If the debit order is indeed unauthorised, the bank will reverse these fees.
Prozesky says FNB clients are notified via SMS every time a new debit order is raised on their accounts, drawing specific attention to the new debit order, as well as the amount and the service provider's name, and if they believe it to be unauthorised, they have the ability to stop, dispute and reverse it. In addition, SMS notifications are sent for every debit order.
"When stopping a particular unauthorised debit order, customers are able to specify a rand value or range of amounts to prevent debit orders from a particular collector being processed in the future.
"It is advisable for consumers to select a wide rand value range to make sure that the unauthorised collector cannot simply change the rand value and thereby circumvent the stop instruction."
Prozesky says disputing and stopping of "larger" debit orders is sometimes done by clients seeking to manage their cash flow.
In such cases the bank "would like to have a conversation" with them to make them aware of the risks of stopping or reversing a legitimate debit order.
It will cost you R5 to dispute a debit order - whether you do so online, via the bank's app, at a branch or telephonically - irrespective of the amount that was debited from your account and of when you dispute the debit order.
To issue a stop payment instruction will cost you R55 if you go into a branch or do so via the call centre.
Doug Hardie, head of client services and risk at Nedbank retail, says if it is established that there was not a valid mandate in place for the debit order, the bank will reverse these fees.
Standard Bank does not charge clients to dispute and stop unauthorised debit orders if they do so within 40 days, irrespective of the amount and of the channel used. But if you dispute 40 days or more after the debit order in question, it will cost you R290.
If it turns out that there is not a valid mandate in place, the fee will not be charged, says Nolene Parboo, head of transactional products at Standard Bank personal and business banking.