Photo: Alkis Konstantinidis

Johannesburg - Consumers are the major culprit when it comes to debit order fraud, and not fly-by-night companies that make deductions without a mandate.

This is according to the Payments Association of SA (PASA), which recently investigated complaints about money being withdrawn from consumers’ accounts without a valid debit order being in place.

CEO Walter Volker notes, in a statement, that the payments agency initiated the investigation because it was implementing a system whereby those who fraudulently deduct against debit orders that are not legitimate would have to pay a R1 000 fine.

The probe found the bulk of disputed orders were actually genuine. He was not immediately available to provide exact statistics, or to name and shame offenders who were abusing the debit order system.

PASA, recognised by the SA Reserve Bank, manages South African payment systems.

Fred Steffers, MD of SmartCollect, notes it is estimated that, or the 60 million debit orders that are fun each month, less than 1 percent is actually fraudulent.

Instead, he says consumers who complain to their banks about unlawful deductions are actually breaching a genuine contract. This, he says, could be for a variety of reasons, including running out of cash to buy food.

Volker adds “we have known for some time that there were many consumers who had unjustly disputed debit orders when they ran into financial difficulties.

“The scope and magnitude of the problem surprised everybody who is involved in the payment chain including the banks, payments systems companies and PASA.”

“When we checked individual debit orders to see whether legal mandates existed, we were surprised find that in the overwhelming number of cases, mandates did indeed exist.”

Steffers explains banks allow consumers to dispute a debit order within 30 days of the amount being deducted, which means the banking fraternity will automatically bounce the order.

If consumers complain after 30 days, the banks allow the merchants 40 days to provide proof of a mandate before acting, he adds.

This, says Steffers, is problematic for businesses because they will run into issues trying to collect, which costs money, and will often be out of pocket if they have already delivered the goods or service.

However, there are still fraudsters out there who are illegally taking money out of people’s accounts.

Last September, PASA cautioned consumers over non-authenticated debit orders (NAEDO), which are activated ahead of regular debit orders, allowing creditors to claim what are often small amounts that go unnoticed on bank statements from their debtors.

At the time, PASA said 0.4 percent of debit orders were flagged as illegitimate, but this was not always the case.

Steffers notes, although the major operators in the debit order processing industry had managed to rid themselves of many fraudulent users, a few still remained.

He adds it is impossible for the companies who processed debit orders to verify that the mandates on every debit order sent for processing by users was valid.

“We don’t have access to their databases and even if we did, the sheer volume of transactions that are processed every month would make it impossible to check every single transaction.”