Cape Town - An alarming figure of nearly one million debit order disputes are lodged every month as fraudsters increasingly gain access to the bank accounts of unsuspecting customers.
Thembisa Magodi has been robbed of almost R17 000. She wasn't held at gun point or hijacked. In fact, she thought her hard-earned cash was safe and secure in her bank account. But she was wrong.
"A travelling company in Durban has been deducting money from my bank account since January 2015. The amounts add up to R16 900. My bank recovered R10 000 in October but R6 900 is still outstanding," said Magodi.
Like Magodi, several other bank account holders have fallen prey to debit order scammers. Fin24 has been inundated with emails from users, some of whom have been victims for years while others were targeted several times over a period of just three months.
Banks have come under severe criticism for failing to protect the money of account holders, with victims going as far as accusing the banks of dragging their feet because they themselves are benefiting from these unauthorised debit orders through the fees charged on reversal transactions.
According to the Payments Association of South Africa (PASA), South African banks collectively process about 56 million debit orders a month. However, PASA CEO Walter Volker told Fin24 about 800 000 debits are disputed every month at an inter-bank level.
Volker explained that the only way of objectively measuring problems associated with debit orders or early debit orders is by analysing the disputes.
"Disputes can be based on a variety of reasons, such as no authority to debit (which might be because of fraud), beneficiary unknown (again, because of fraud, or because the name is unfamiliar or has been forgotten by the account holder), the amount is incorrect, the date of deduction is incorrect, etc."
He said the total disputes at an inter-bank level is currently around 0.5% for debit orders, close to 200 000 per month; and around 4% to 6% for early debit orders at 600 000 per month.
"From an efficiency perspective, this is not good for the system, neither is the fact that there are fraudulent or illegal deductions included in this number."
However, Volker pointed out that PASA together with banks is making every effort to weed out crooked beneficiaries from the system. "Since November 2013, about 300 rogue users have been taken off the debit order system, meaning they can’t have debit orders processed by any bank."
He added that consumers must approach their own bank to query unfamiliar debit orders. "If it is believed that fraud is involved, a case should be opened at the South African Police Service and an affidavit submitted."
Volker further advised consumers to protect their banking credentials and to keep them safe and secret, and to check their deductions on all accounts on a regular basis.
What the banks have to say
Fin24 also checked in with the so-called big five banks - Standard Bank [JSE:SBK], Absa, Nedbank [JSE:NED], First National Bank (FNB) and Capitec [JSE:CPI] - to find out how the custodians of our money are keeping it safe from the grip of scammers.
Although Standard Bank fulfils the function of a payment facilitator where any debit order is presented for payment, the bank does not initiate any external debit orders, spokesperson Ross Linstrom said.
"A debit order is an agreement between the account holder and an external company in which the customer would authorise such service provider to debit an amount from his/her bank account for services provided.
"A debit order is not a contract between the account holder and the bank, and the bank is not a party to the agreement at all," he emphasised.
Linstrom explained that in the event of a disputed or unauthorised debit order, the bank will query the validity of the transaction with the company that debited the account.
"As such, the account holder indeed has the responsibility to regularly scrutinise his/her account statement(s) and bring to the bank’s attention any unauthorised debit orders."
This should be done within 40 days of the debit order being processed.
Linstrom called on account holders to let their bank know if there are any suspicious debit orders on their account so that the bank can assist them in preventing further abuse.
He added that the debit order environment is currently under review to mitigate any abuse of the system, with the PASA, the Banking Association of SA and all major retail banks playing an active role.
An Absa spokesperson told Fin24 that extensive action is being taken against offenders. However, there is no clear evidence that all disputes by customers are valid.
"The majority of disputed transactions occur when account holders use the process of disputing debit orders within 40 days of collection to manage personal cash flow. For the same reason, there are no reliable statistics as to the percentage of disputes that may be the result of fraud."
Absa is working to ease the frustrations of its account holders.
"Absa recently introduced a first-to-market online tool that allows our customers to reverse unauthorised debit orders 24 hours a day. The unauthorised debit order reversal functionality was previously only available in-branch, but is now also available free online for all Absa customers."
The bank also encourages customers to make use of their transaction notification service as well as to regularly check their balance statements for indications of possible fraud.
"Customers are encouraged to scrutinise bank statements timeously and report any suspect or unauthorised debit orders immediately."
Nedbank echoed this. "Bank customers should carefully check their bank statements every month for any debit order deductions that they have not authorised. If they discover such a deduction, they should contact their bank immediately," said Esme Arendse, divisional executive of group communications at Nedbank.
She said Nedbank is committed to working with the PASA to combat the abuse of the debit order system. "As an industry, banks are intensely focused on addressing this issue."
Nedbank urged its clients to contact the Nedbank Client Contact Centre at 0860 555 111 or approach their nearest branch if they have any queries.
Ryan Prozesky, FNB’s chief executive of value banking solutions, said the bank is focused on assisting any customers who find they have debit orders on their accounts that they are not aware of.
"FNB fully supports the right of our consumers to dispute, stop and reverse debit orders without inconvenience," said Prozesky.
Currently customers can reverse unauthorised debit orders and refund their accounts if they ask for assistance within 40 days from debit occurring at a branch or via FNB's call centre. Older debit orders can also be reversed, but the resolution takes longer.
"We can confirm that we are working on reversal functionality via our other digital platforms," said Prozesky. These details will be announced in 2016.
FNB has also taken steps to help prevent unauthorised debit orders.
"Customers receive an SMS if we identify a debit order that could potentially be unauthorised, regardless of the amount," said Prozesky. "No fees are charged when a customer reverses an unauthorised debit order," he added.
Capitec Bank's head of communications Charl Nel said the bank is working with industry role players to improve conditions.
He said Capitec does not know what proportion of debit orders is unauthorised, as not all disputed debit orders are unauthorised.
"We simply act on the client’s request. A bank does not initiate a debit order. It is initiated by the client or a service provider."
What you can do to mitigate the risks
- Subscribe to your bank's SMS notification services.
- Scrutinise your bank statements each month by looking at each deduction, no matter how small.
- If you pick up any discrepancies, dispute this with your bank within 40 days from when the transaction took place.
- If fraud is involved, it would be best to report the incident at a police station.
- Protect your banking information.
If you feel aggrieved by not getting assistance from your bank you can also approach the Ombudsman for Banking Services, which outlines the following steps to be taken:
First lodge a formal, written complaint directly with your bank's dispute resolution department unit. Contact details are available from your bank or you may contact the ombudsman.
Ask for a complaint reference number from your bank.
Allow the bank 20 working days in which to respond to your complaint.
Obtain a written response from your bank.
If you are dissatisfied with the outcome, contact the Ombudsman for Banking Services and its help desk personnel will advise you on what to do next.