A new debit order system will be made compulsory towards the end of the year, but will it protect both consumer and provider, asks Angelique Ruzicka
Organised crime syndicates operating on a massive scale, duping banking customers by debiting sums off their bank accounts, were discovered by investigators last month.
According to Fin24, a Hawks probe uncovered at least R1.6 billion a year being illegally debited from the bank accounts of ordinary South Africans.
But why does this all lie undetected by customers for so long? There are multiple reasons for this.
There are 55 million debit orders to the value of R80 billion processed by South Africa’s banks every month.
To add to this, customers don’t keep track of their own debit orders or know which ones are going off from their accounts.
A poll conducted by Capitec Bank revealed that 20% of more than 1 000 respondents had no idea which debit orders went off their accounts each month.
A further 11% were unsure whether they were aware of all the debit orders active on their account or not.
Worryingly, 3% said they didn’t care to check.
Ignorance over DebiCheck
The survey also showed that the majority of respondents (72%) had not heard about DebiCheck – a new debit order system that was introduced by the Payments Association of SA to protect South Africans against debit order fraud.
In the past, fraudulent debit orders weren’t spotted because customers didn’t receive notifications when money was debited, particularly debits of less than R100.
This saw the rise of the “R99 scam”, in which fraudsters would debit amounts of R99 or less to stay under the notification radar.
DebiCheck enables a banking customer to confirm a debit order once-off at the beginning of a contract.
It’s been introduced to prevent any unauthorised debit orders from being submitted and deducted from accounts.
It was meant to be introduced last year, but as the banks weren’t ready for an industry-wide roll-out the launch has been delayed to November 1 this year.
But this doesn’t mean that customers can’t dispute or cancel debit orders in the meantime.
With FNB, for example, customers can stop, dispute or reverse unauthorised debit orders of less than R200 for free through the FNB app, online banking and cellphone banking for those who do not have access to the internet or smartphones.
Keith McIvor, managing director of debt management software provider Intuitive, believes the launch will not be postponed again, but relays the scale of the operation.
“It is a massive, industry-wide project and has many complexities and costs attached to it. DebiCheck is necessary to level the playing field for stakeholders and cut down on the negative behaviour that we are seeing in the world of debit orders currently.”
Will it make a difference?
Industry commentators say DebiCheck will go some ways towards reducing the amount of debit order fraud going forward.
“DebiCheck puts clients in control of their money by notifying them when a request is initiated to load a debit order on their account, so they can then approve or decline this request,” says Francois Viviers of Capitec.
Clients do pay a nominal fee when it comes to implementing DebiCheck. With Capitec, for instance, it costs R1 to approve debit orders on the bank’s app.
“There are no additional DebiCheck costs on the actual debit order fee,” adds Viviers.
In spite of the introduction of DebiCheck, debit order fraud is still a significant problem in South Africa and the new notification system won’t be the answer to completely eradicating it. What’s more, the system itself gives consumers the opportunity to take advantage of the situation and avoid paying genuine contracts.
McIvor adds: “Debit order fraud is a significant problem, but it is not only the illegal submission of debit order collection instructions via rogue debit order submitters. It is also the high levels of debit order reversals by consumers who renege on valid, contractual commitments they have by reversing their debit orders. The impact on the businesses that collect their revenues via debit order is significant and very damaging.”
What about orders that have already been approved?
One area where DebiCheck currently falls short is that it doesn’t help in detecting current fraudulent debit orders.
Capitec has revealed that it is migrating and converting current non-authenticated early debit orders into the DebiCheck system.
Viviers adds: “These debit orders will not require authentication as they are already loaded on the client’s account and can be viewed for free from our banking app.”
It will then remain the customer’s responsibility to check all current and previous debit orders to make sure that they are genuine and cancel the ones that are not.
It will also be left to them to fight to get their money back from the offending parties, which may not be possible as fraudsters don’t often operate their accounts in South Africa and money, once debited, is often transferred out of the country and into another account swiftly.
What makes you vulnerable to debit order fraud?
Being ignorant about your active debit orders: If you’re not aware of what gets put into and goes out of your account it will be hard to differentiate between a genuine debit you set up and one that’s fraudulent. Ask your bank about how you can check your debit orders.
Not checking all current debit orders: It’s important to look at all your debit orders and check whether they are, in fact, legitimate, including even the smallest transactions.
Capitec now notifies customers if a debit order of R30 or more has come off their account, but that does not stop a debit order of a smaller amount being processed.
Not taking enough action: If you want to cancel a debit order completely you have to do so with the original service provider too.
For example, if you’ve arranged a debit order to come off from your gym then you have to cancel with the gym as well as your bank to make sure that money doesn’t come off your account.