Move to snuff out debit order fraud

BANKS’ NEW SYSTEM: CONSUMERS MUST VERIFY

Several complaints over festive season of unauthorised debits from accounts. Moneyweb

Banks are moving to crack down on debit order fraud with the introduction of a new debit order authentication system. And they have committed themselves to tracking down and acting against those who abuse the system.

DebiCheck, a world-first debit order authentication system, is currently being piloted across 11 domestic banks. It is expected to curb abuse by allowing banks, companies and consumers to verify and authenticate debit orders.

Walter Volker, chief executive of payment system management body Pasa, said: “If someone wants to introduce a debit order instruction, they must contact the bank. The bank must then contact its client and inform them of the company name, the amount and time period of the [proposed] debit order and get their consent. The bank will then register this on a database and only when authenticated, will it be processed.”

On average, 36.6 million debit orders valued at R66 billion are processed monthly, of which 1.6% of monthly volumes are disputed and 9.7% of monthly volumes are unsuccessful, latest fourth quarter data from Pasa shows.

Many disputes relate to cashflow management by consumers struggling to meet their financial obligations, Volker said.

Other complaints relate to unauthorised debit orders. A number of people took to social media over the festive season to complain about money being taken from their accounts by unauthorised debit orders and in some cases by entities they had never heard of or shared banking details with.

In such cases, Volker said it is possible that debit order files with banking details were illegally obtained from staff at companies authorised to process legitimate debit orders. Another possible scenario involves call centres, whereby agents sell items to consumers and get permission to collect funds via debit order – the catch: the items never arrive.

He said Pasa investigates every disputed debit order. In cases where it suspects that entities may be abusing the system, it requests a sample of their database and mandates – either paperwork or recorded telephonic conversations. These are checked against criteria used to define legitimate consent and debit orders. Should the entities be found to be at fault, they are issued with penalties of R1 000 per debit order, with Pasa issuing penalties to the value of R3 million in 2017.

He added that Pasa has taken down roughly 300 rogue users over the past four to five years. It places company details on a debit order abuse list, which banks can review. It also lists the personal details of company directors and has recently begun engaging with the Companies and Intellectual Property Commission to try to prevent bogus companies run by directors found to have been involved in debit order abuse from entering the system.

Social media complaints are by and large levelled against banks for failing to authenticate debit order instructions. Volker said that it is difficult for them to do so as they are usually not privy to agreements or contracts struck between consumers and companies and as the current system is highly manual, dependent on paperwork and voice calls.

Reana Steyn, Ombudsman for Banking Services, said banks do have a responsibility to ensure debit order instructions are valid.

“Should the complainant raise any issues, the bank will have to revert to the original written instructions and verify the facts. A consumer must report the matter within 40 days, in which event the bank will immediately reverse the disputed debit order. Once the bank has investigated, the debit order will be deducted again, if found to be valid.

“If the consumer queries the debit order deduction more than 40 days after it was first debited to his/her account, the consumer may still apply to their bank to have it reversed. The bank will query the validity with the service provider’s bank. That bank will be given 30 days written notice to prove the authenticity or validity of the debit order. It will be cancelled if invalid and the funds returned.”