#ConsumerWatch: Standard Bank flags massive debit order scam

Picture: Mike Hutchings/Reuters/African News Agency (ANA) Archives

Picture: Mike Hutchings/Reuters/African News Agency (ANA) Archives

Published Dec 18, 2018


It’s an amount that falls under many people’s radar - relatively insignificant, until you need it. The amount, R99, is commonly been under banks’ thresholds of notification, which became an enticing proposition for swindlers.

Banking customers have griped about it for years, with seemingly little done by the industry.

The excuse: we can’t do anything about the debit orders.

But the argument has never sat well with customers, who say banks are the custodians of their cash so they should do more about security - and take responsibility for refunding when things go wrong.

Last week, Capitec released a statement about a R99 scam it detected.

Francois Viviers, the Capitec executive of marketing and communications, said the bank identified a particular debit order scam, and had saved clients time and money.

“The occurrence of fraudulent debit orders has been a painful point for all banking clients and a great concern to us for a long while.

“Fraudulent debit order originators typically submit debit orders for less than R99 as this is normally below the SMS notification threshold and therefore does not attract as much attention.

“To protect our clients from these companies that put through invalid debit orders, Capitec has reduced the minimum value that triggers an SMS notification from R100 to R30 so that clients are informed of smaller debit orders on their accounts.”

That’s great news for Capitec clients, but some banks are sending automatic notifications for every transaction, no matter how small.

Viviers continued: “Through active monitoring of these disputes, we have identified this particular debit order originator as potential fraud and escalated it to Pasa (Payments Association of South Africa) three weeks ago.

“In co-operation with the rest of the industry, Pasa has given permission to reverse the debit orders and refund clients last week.

“We have since started the process to refund more than 25000 clients for the value of the debit order as well as the debit order fee and debit order dispute fees.”

The scam went far beyond 25000 clients though: it affected almost half a million people in South Africa and was flagged because it was so massive - and brazen.

Pasa’s Walter Volker told me Standard Bank first brought it to their attention when a “company” called Umvuzo Payment Services (UPS) had illegally submitted a file of 400000 transactions into the EFT debit payment system.

“The exiting of this user and reversal of all these transactions has resulted in the paying banks (including Capitec), automatically reversing all debits against their customer accounts that were part of this batch.”

Volker said fraud on such a massive scale wasn’t commonplace.

“It seldom happens that a complete batch (such as this one) is deemed to be unauthorised by consumers and thus completely illegal; most such batches are some unauthorised debit orders and are less easily detected.”

Who foots the bill for this massive fraud? If 400000 such debits went off accounts, at around R99 each, that’s a loss of almost R40million.

Volker explained: “The system actually works very well in that the sponsoring bank (in this case Standard Bank) that introduces the user (UPS) into the payment system is liable for any risks and losses.

“The paying/ homing banks (such as Capitec, FNB and so on) therefore reverse payments disputed by their clients back to the sponsoring bank. In short, therefore, in this case as the whole batch is considered fraudulent, Standard Bank will be liable for the full amount - and it is up to them to recover as much of the loss from the account of the user.”

Volker said Standard Bank should be commended for being pro-active and decisive in the way it dealt with the user, “despite any potential financial or reputational implications”.

I agree - it’s not often that we give credit to banks. And it is a lesson to customers: we need to check our statements religiously. For amounts under R200, banks don’t generally charge for reversals, provided they’re done online or on the banking app.

Customers also have a duty to keep an eye on their accounts and if something is amiss, they need to flag it with their banks. Make it a habit: set up the app on your phone and, at the beginning of each month, when you make payments, check your statements for anything amiss. It could save a lot of money - provided you do so within the 40-day window.

* Georgina Crouth is a consumer watchdog with serious bite. Write to her at [email protected], tweet her @georginacrouth and follow her on  Facebook.

The Star

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