New, easy online way to reverse dodgy debit orders
Absa is the first bank to offer a quick way immediately to reverse a questionable debit order on your account. Lorraine Kearney reports
Your bank will allow you to query or stop a debit order on your account, but Absa has gone a step further by announcing that its customers can now reverse unauthorised debit orders online, and the money will land back in their accounts immediately. The bank is the first to offer the service, but the other big banks are exploring similar services.
An unauthorised debit order is one for which you have not given your permission to the business concerned to take money off your account; authorised debit orders are ones for which you have signed up.
“Unauthorised debit orders have become a huge challenge for all banks,” Marius de la Rey, the chief executive, customer channels and distribution, Barclays Africa Retail and Business Banking, says. “Customers have the ability to view and stop debit orders quickly and easily using online banking and now can also personally reverse unauthorised debit orders at any time by logging on to Absa Online.”
South African banks collectively process about 56 million debit orders a month, says Walter Volker, the chief executive of the Payments Association of South Africa (Pasa), which manages payment systems in South Africa. “Close to a million inter-bank debit orders, including non-authenticated early debit orders – are disputed each month. The dispute ratio for non- authenticated debit orders is between 4.5 and six percent,” he says.
Many disputed transactions are fraudulent. Pasa is working to stop this activity; since November 2013, about 300 rogue users have been taken off the debit order system, meaning they cannot have debit orders processed by any bank.
The Absa tool is “in the interests of consumer protection and customer service”, Volker says. “It has made more accessible what you can do in the branch anyway.” The bank consulted with the association in designing its tool, which is “within the ambit of our rules”, he adds.
Absa says that, in line with the Treating Customers Fairly principles, customers have a right to dispute an incorrectly concluded transaction and to stop future transactions.
With its online tool, Absa now allows you to reverse or dispute an unauthorised debit order within 40 days. You will receive the money back in your account instantly (see “How Absa’s tool works”).
The bank will also stop debit orders from the same source from going off your account in the future.
But the onus is on bank customers to check their statements regularly for any unauthorised or fraudulent debits. Banks warn that in most cases, these amounts are very small and can easily be missed.
Some people stop valid debit orders as a way of managing their cash flow. De la Rey cautions Absa customers against using its online tool to do this.
“Many consumers unjustly dispute debit orders when they are short of cash or run into financial difficulties,” he says. “It is important for customers to note that, if they use the dispute process to manage cash flow, they run the risk of losing out on, for example, [insurance] policy pay-outs when they claim, due to an inconsistent payment history. Similarly, a high dispute ratio in a person’s account will lead to that person’s risk profile being negatively affected.”
Volker echoes these sentiments, saying you may not stop a legitimate debit order, although he admits that people stop debit orders to manage their cash flow “quite extensively, probably because consumers are under increasing financial pressure”. It is a big concern with the new tool. “It is sad that consumers do abuse a system that is very efficient,” Volker says.
Absa is just the first to step into the waters. Capitec will offer something similar soon.
“Capitec Bank will have the same easy-dispute option for consumers in the next few weeks. The difference in our approach and that offered by others is the way clients will access the easy- dispute procedure,” spokesman Charl Nel says. “We believe that only a small portion of the population has access to desktop computers and internet banking. Our approach will be to use more accessible technology, allowing the consumer to easily dispute an unauthorised debit order on their account.”
Standard Bank also says it has plans to enable its customers to reverse unauthorised debit orders via online and mobile channels.
Standard Bank points out, though, that it has no control over the debit order system. It “merely acts as a payment mechanism where such debit orders get presented for payment”. The onus is on you, the account holder, to regularly scrutinise your account statements and bring to the bank's attention any unauthorised entry, it says.
“Regrettably, some users of the debit order system do abuse it. To address these issues, the South African Reserve Bank, in conjunction with [Pasa] and the banking industry, have put mechanisms in place to better manage users of the system and are developing an ‘authenticated debit order system’ that will give customers greater control,” Standard Bank says.
The bank says that if you, as a customer, want to report and reverse an unauthorised debit order, you need to report it to the nearest branch within 40 days. You must complete a dispute form confirming that you give the bank consent to do the reversal.
First National Bank (FNB) is also working on reversal functionality via its digital platforms, with details to be announced next year, Ryan Prozesky, FNB’s chief executive of value banking solutions, says.
FNB says it “fully supports the right of our consumers to dispute, stop and reverse debit orders without inconvenience”. Currently, customers can reverse unauthorised debit orders and refund their accounts almost immediately, Prozesky says, but they must ask for assistance within 40 days of the debit occurring, at a branch or via FNB’s call centre.
FNB has several systems in place to help you, he says. Customers receive an SMS if the bank identifies a debit order that could possibly be unauthorised, regardless of the amount; and no fees are charged when a customer reverses an unauthorised debit order.
At Nedbank, Anton de Wet, the managing executive of client engagement, says that Nedbank does not currently offer a digital solution because, until recently, the rules prevented this – they required written consent with face-to-face interaction, which could be done only at a branch. “We are looking at how we can now phase in channels such as call-centre, internet and mobile banking,” he says.