Johannesburg - Consumer fraud plays a much bigger role in debit order fraud than first anticipated, according to Fred Steffers, MD of SmartCollect, a payment systems company.
He and other players in the payment systems arena had long suspected that consumer fraud played a major role in debit order fraud.
“It is extremely difficult to differentiate between fraud committed by consumers and bogus debit orders submitted by call centres and other users of the debit order system,” explained Steffers.
He said many consumers reneged on their debit orders for which there were legal mandates when they ran short of cash.
Steffers said in the past the Payments Association of South Africa (Pasa) cautioned that many consumers unjustly disputed debit orders when they ran into financial difficulties.
According to Walter Volker, CEO of Pasa, the scope and magnitude of the problem surprised everybody involved in the payment chain, including the banks, payments systems companies and Pasa.
Volker said a thorough investigation done by Pasa showed that consumers were committing fraud by unjustly disputing debit orders that they had legally given a mandate for.
The discovery was part of the process that Pasa initiated to fine offenders up to R1 000 per fraudulent debit order that had been submitted.
Steffers, however, said he has some concerns about the newly introduced Pasa policy to fine the abusers of debit order systems up to R1 000 per false debit order.
“While we have certain reservations about the fines system which has been imposed by Pasa, it will certainly help to weed out the criminal element which has infiltrated the debit order industry," said Steffers.
“An unintended consequence is going to be the fact that it is going to have an extremely negative impact on ethical payments systems companies such as ourselves because it is inevitable that a very small percentage of debit orders sent to us by our users are problematic for a variety of reasons, including fraud.”
He said it was impossible for the companies who processed debit orders to verify that the mandates on every debit order sent for processing by users was valid.
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