Payments system to get closer scrutiny

UNAUTHORISED rogue debit orders are nothing new; banks and customers around South Africa will readily attest to this.

Often they result from sloppy data capture by call-centre agents, or incorrect details provided by consumers.

But there are thousands of illegal debits that stem from fraudsters fleecing consumers, many of whom do not notice the deductions because they do not check their monthly bank statements.

The good news is that things are going to get tougher for these bank account plunderers.

By mid-2015, all early debit orders — those deducted immediately after salaries are paid to increase collection rates — will be subjected to “explicit” electronic authentication by consumers before an account is debited, followed by all other debit orders soon afterwards.

From next year, companies will also be penalised for every debit order of any kind found to be without a mandate following a customer dispute.

The changes, to be introduced by the Payments Association of South Africa which is responsible for managing the country’s payment systems, will hopefully stop the rot among South Africa’s 31 million monthly debit orders valued at more than R72-billion in total.

About 200 000 debit order disputes are recorded each month.

“The debit order payment system is one of the most efficient andwell-functioning systems . . . but there are, from time to time, beneficiary parties and consumers that abuse this system,” said Walter Volker, the association’s CEO.

He said some consumers abused their right to dispute transactions as a way of managing their cash flow, or to avoid repayment obligations.

Some beneficiaries or users submitted debit orders without a proper mandate, with no mandate, or with expired mandates, Volker said.

Banks do not know whether a debit is authorised when they process it.

“The level of inefficiency measured by disputes is . . . at 0.5%, and unpaid due to lack of funds at around 10%,” said Volker.

A process of forcing beneficiaries to register a unique abbreviated short name was started in August 2012.

“A debit order abuse database has been developed and is maintained by the payments association for any company that is put under review,” said Volker.

“If it is found that the company has submitted debit orders without a mandate [written or verbally recorded] it will be blocked from use of the system.” More than 100 companies are already on the list.

Volker said the efficiency of the system came from ensuring the integrity of the beneficiary.

“Following pressure from all quarters to open up the system and make it more accessible, rogue abusers have also started coming in and have submitted files without the necessary mandates to back them up,” he said.

“At present we are trying to maintain a balance of efficiency, affordability or cost containment, security, access, and other factors.”

Consumers should scrutinise their bank statements regularly, and immediately dispute any unlawful debit orders with their bank.

The longer the delay, the more difficult — and often expensive — it becomes.

Tune in to Power FM 98.7’s Power Breakfast at 8.50am tomorrow to hear more