Have we made it too easy to dis­pute debit or­ders?

Many bank cus­tomers are us­ing the debit or­der dis­pute res­o­lu­tion sys­tem to can­cel le­git­i­mate debit or­ders to man­age their cash flow, writes

CityPress - - Business -

The move by banks to make it eas­ier for in­di­vid­u­als to re­verse unau­tho­rised debit or­ders has been an im­por­tant step in main­tain­ing the in­tegrity of the bank­ing sys­tem, es­pe­cially af­ter in­creases in il­le­gal debit or­ders where syn­di­cates would ob­tain bank ac­count de­tails and il­le­gally deduct money from in­di­vid­u­als’ ac­counts us­ing the debit or­der sys­tem.

Smart­phone bank­ing apps in­tro­duced by FNB and Capitec have made it eas­ier for in­di­vid­u­als to track the debit or­ders go­ing off their ac­counts and im­me­di­ately re­verse any unau­tho­rised deb­its.

How­ever, with the eco­nomic down­turn, many bank cus­tomers are us­ing the debit or­der dis­pute res­o­lu­tion sys­tem to can­cel le­git­i­mate debit or­ders in or­der to man­age their cash flow.

Pay­ments As­so­ci­a­tion of SA (Pasa) chief ex­ec­u­tive of­fi­cer Wal­ter Volker says that, while there has been a sig­nif­i­cant in­crease in the num­ber of dis­puted debit or­ders, the ma­jor­ity are le­git­i­mate – in other words, a for­mal man­date is in place for the com­pany or ser­vice provider to deduct the funds.

“From an in­dus­try point of view, we have seen an in­crease in the num­ber of debit or­der dis­putes re­cently and our data in­di­cates that such dis­putes are mostly as a re­sult of con­sumers dis­put­ing valid man­dates rather than users in­putting in­valid man­dates into the pay­ment sys­tem.

“At the same time, we are aware that a num­ber of banks have in­tro­duced var­i­ous tech­no­log­i­cal func­tion­al­ity and process enhancements to ser­vice their cus­tomers bet­ter. It is pos­si­ble that some con­sumers are abus­ing such tech­no­log­i­cal in­no­va­tions to more eas­ily dis­pute valid debit or­ders,” says Volker.

Be­nay Sager, chief op­er­a­tions of­fi­cer for the IDM Group, which owns debt coun­selling firm DebtBusters, says about 70% of dis­puted debit or­ders have come from con­sumers who bank with FNB and Capitec since the in­tro­duc­tion of their bank­ing apps, and they have ap­proached both banks to find a res­o­lu­tion.

In re­sponse, FNB has re­duced the amount that one can re­verse via the app to R200. For amounts above R200, cus­tomers must con­tact the call cen­tre or visit their near­est branch.

Capitec head of com­mu­ni­ca­tions Charl Nel says the bank will be send­ing their debit or­der clients reg­u­lar SMSes, in­di­cat­ing to them that dis­put­ing a le­gal and cor­rect debit or­der will af­fect their credit score in the long run and might curb their ac­cess to ad­di­tional credit in fu­ture.

How­ever, the bank feels very strongly that it needs to con­tinue to pro­vide an easy mech­a­nism for cus­tomers to deal with the “men­ace of unau­tho­rised debit or­ders” plagu­ing them.

The new debit or­der au­then­ti­ca­tion sys­tem

Find­ing the bal­ance be­tween pro­tect­ing cus­tomers against crim­i­nals and en­sur­ing that peo­ple meet their fi­nan­cial obli­ga­tions will re­main a chal­lenge un­til the im­ple­men­ta­tion of the au­then­ti­cated debit or­der sys­tem which is cur­rently be­ing de­vel­oped by Pasa.

Ac­cord­ing to Pasa, with Au­then­ti­cated Col­lec­tions, con­sumers will elec­tron­i­cally con­firm to their bank that they agree to the de­tails of the spe­cific debit or­der. Once the cus­tomer has au­then­ti­cated the debit or­der, the bank will check the debit or­der pay­ment in­struc­tion from the com­pany/user against the au­then­ti­cated man­date to en­sure that the debit is within the pa­ram­e­ters agreed to, prior to pro­cess­ing. At this stage the process will only be im­ple­mented for early debit or­ders, and not for nor­mal debit or­ders, as early debit or­ders are pri­mar­ily the area with the high­est ex­pe­ri­ence of fraud. Early debit or­ders also ex­pe­ri­ence the high­est rate of dis­puted debit or­ders.

“Authen­ti­cat­ing all early debit or­ders is a means to pro­tect con­sumers from un­scrupu­lous com­pa­nies who at­tempt to debit con­sumers’ bank ac­counts with­out their per­mis­sion,” says Volker. “As a re­sult, con­sumers will know who is deb­it­ing their bank ac­count, when they will debit and how much will be deb­ited. At the same time, this new sys­tem will also pro­tect com­pa­nies, in that au­then­ti­cated man­dates will not be eas­ily re­versible at the payer’s bank.”

The pi­lot phase will start in June 2017 and all new early debit or­der con­tracts will have to be au­then­ti­cated. From there com­pa­nies have an­other 18 months to con­vert debit or­ders to the new sys­tem.

The fi­nal phase is ex­pected to be in Jan­uary 2019.

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