The Reserve Bank in Pretoria. Picture: FINANCIAL MAIL
The Reserve Bank in Pretoria. Picture: FINANCIAL MAIL

South Africans will have to live longer with debit order abuse due to the Reserve Bank's postponement of the implementation date for DebiCheck - a new way of confirming debit orders with you once off before they are processed by your bank.

The Reserve Bank last month published in the Government Gazette that the new implementation date for DebiCheck, also known as Authenticated Collections, will now be October 31 this year instead of the end of this month, and the new sunset date for the termination of all old debit orders - or non-DebiCheck orders - is now October 31 next year.

This means that from November this year, no new debit orders will be processed early unless they are DebiCheck debit orders.

An early debit order (EDO) is processed earlier in the day than a normal debit order and has a "credit checking" feature, which means that as soon as money is deposited in your account it triggers a debit.

And from November next year all debit orders - including those already on your account - must be DebiCheck debit orders.

In other words, until November 2020 there's not much you can do to prevent a third party that has access to your bank account number from placing a debit order on your account without your consent.

Work on DebiCheck started in 2013 after a spike in fraudulent debit orders. Late last year hundreds of thousands of consumers were victims of a R99 debit order scam.

DebiCheck will ensure no debit order is paid unless you have confirmed that you wish to pay the service provider a certain amount from your account and aims to stamp out rogue debit orders - those being processed to your bank accounts without your consent - and put a stop to consumers disputing valid debit orders.

According to a directive issued by the Reserve Bank, an in-depth investigation into early debit orders identified various issues, in both the Authenticated Early Debit Order and the Non-Authenticated Early Debit Order systems.

These issues spread across the payment system value chain from the customer who authorises the debit (payer) through to the collector (user), system operators, sponsoring and acquiring banks.

Walter Volker, CEO of the Payments Association of SA (Pasa), says a "tremendous effort" has been made by the payments industry - from the SARB to the banks, Pasa and user associations, such as insurance companies and lenders - to identify and address gaps and weaknesses in the system.

"In the process of doing so, due process has to be followed, and we have to ensure that any negative consumer impacts are minimised, especially because for 99% of consumers the debit order system works very well, is reliable and cost effective."

Volker says the implementation date had to be postponed mainly due to more complex IT and business processes than originally envisaged.

"DebiCheck is unique in the world, so we had to design, build and implement something that has never been done anywhere else," he said.

Although 11 of the banks are using DebiCheck, and some have done so since August last year, they have experienced ongoing systems instability.

A third challenge is to ensure consumer awareness and understanding of the new service and the process that is necessary to ensure a successful mandate registration. "This can only really be done on a massive scale when the first two elements have reached a minimum level of stability and adoption."

Volker is confident the industry will reach this point in the first quarter of this year, including increased levels of awareness.

"We are also in proof of concept stage with regard to a new debit order dispute process, which will hopefully provide the banks and Pasa with more formal feedback in the event of illegal deductions [and] will be of the nature and quality to be usable in a court of law so that we can achieve successful criminal prosecutions of rogue users.

"This is something that we are finding difficulty in achieving with the current dispute process."

At Pasa's conference in August, Volker said all entities that debit your account will have to adopt DebiCheck. Pasa will have to sign on these users, such as call centres, insurance companies and microlenders, of which there are 4,600, he told the conference.

What are the banks doing? Francois Viviers, the executive head of marketing and communications at Capitec, says the occurrence of debit order scams is a banking industry challenge which is being taken seriously.

"All the banks are working with Pasa to curb the problem. DebiCheck is one of the solutions that will help prevent this fraud from taking place.

"We are focusing on creating awareness with clients to review and dispute potential fraudulent debit orders on the app or at a branch. The debit order originators are then investigated and referred to Pasa if the bank suspects fraud."

When debit orders are found to be fraudulent, the amounts debited and fees incurred by the clients are refunded, he says.

Ulrich Janse van Rensburg, the head of fraud strategy at the Absa Group, says Absa has not seen an increase in unauthorised debit orders, but is aware of industry spikes.

Both Absa and Capitec have introduced alert notifications for transactions under R100, as fraudulent debit order originators typically submit debit orders for less than R99 as this is normally below the SMS notification threshold and therefore does not attract as much attention.

"Absa NotifyMe customers are notified of all transactions processed against their accounts regardless of the amount, which is why we have a much lower prevalence of the R99 scam," says Janse van Rensburg.

Last month, Capitec reduced the minimum value that triggers an SMS notification from R100 to R30.