A staggering average of 250 000 monthly requests for debit order reversals shows something is seriously amiss, says J Henrich Mueller.
After the announcement that several banks have at last blacklisted a few delinquent companies involved in the rampant debit order fraud, surely it’s high time that there is an official in-depth inquiry into the banking industry, which seems to be riven with poor business practices and lack of transparency on how they construct their excessively priced service fees.
There was significantly no indication of any prosecutions of those blacklisted companies. There are reportedly a staggering average 250 000 monthly requests to South African banks for debit order reversals. Clearly something is seriously amiss and highly detrimental to the public’s interest.
For some time there have been numerous incidences of rogue companies lodging fraudulent debit orders which banks obligingly and unquestioningly execute. There are few consequences for this criminality. The fraudsters merely claim that it was an error by a staff member, who will be disciplined. The bank concerned eventually reverses the debit order, albeit after inflicting a service charge on the victim, which can vary from R35 to R145.
The cardinal problem is that bank clients have no control over their debit order transactions. This is because none of the banks insist on a client’s authorisation signature before instituting a debit order. A telephonic request is considered sufficient.
If a debit order is improperly loaded on to a victim’s bank account, the onus is on that person to approach the offending company, and not the bank, to request cancellation, as the banks evade responsibility by saying they are the mere intermediaries. If the company refuses to cancel the debit order and the client persists in approaches to the bank, the amount will be reversed, albeit unfairly incurring the onerous service fees. But the debit order can later be reinstated by rogue companies by merely amending the amount, and then the frustrating process replicates indefinitely.
The solution is surprisingly simple. We need to take back control from the banks and arrogant businesses. Consumers should change from debit orders to stop orders which are very similarly priced. The transaction is then directly between you and your bank.
Generally, companies are reluctant to use this method as they then cannot unilaterally amend the orders without customer permission.
If the public displays some consumer unity they can take back their consumer power, and companies will have to accept this transaction medium, fearing a drastic loss of custom by not being market- driven and complying with requests for stop order methodology.
Banks claim it will be too onerous for them to obtain proper verification, as they service a great many debit order transactions. Balderdash! The technology is already in place and routinely used with hundreds of thousands of daily credit card and EFT transactions. They could simply give all their clients an initial authorisation PIN, which must be applied when approving any debit or stop order applications, or increases in monthly debit payments.
J Heinrich Mueller
* The views expressed here are not necessarily those of Independent Newspapers.