In a move to stop abuses of the debit order system, the Banking Council is looking at ways of giving you total control over debit orders that are put through your account.
The Banking Council's Adri Grobler says the council is holding discussions with various parties, including the Payments Association of South Africa and the Automated Clearing Bureau, as well as companies that make extensive use of debit orders, such as life assurers.
Personal Finance has highlighted the dangers of debit orders several times. While a debit order can be a very useful method of paying for something on a regular basis, the system is open to abuse.
Some consumers have spent months fruitlessly trying to cancel a debit order instruction and, as a last resort, have had to close their bank accounts to stop third parties from dipping into their money.
A common method of side-stepping a debit order reversal by a consumer to a bank is for the company putting through the debit order to change the amount to be deducted slightly. The bank's computer system is then unable to detect these debits. Other companies simply ignore the cancellation of a debit order, either because the organisation is crooked or because of a dispute over payment.
Meanwhile, the Banking Adjudicator, Advocate Neville Melville, says there are rules to safeguard your rights as well as those of the organisation putting through a debit order.
Melville says a debit order is a contract between you and the organisation, so your bank will accept any debits put through the system in good faith and, except as provided in the rules, cannot be held responsible for the validity or correctness of a debit order.
He says the debit order system is governed by the provisions of Bankserve, the umbrella body under which joint bank operations such as the Automated Clearing Bureau and Saswitch are run.
If you want to dispute a debit order, you must state in writing:
* That you did not authorise the deduction; or
* That the deduction contravenes the authority given to the organisation that put through the order; or
* That you have instructed the organisation to cancel the authority. Some banks have pre-printed forms for this purpose.
Once your bank receives your complaint, it should:
* Reverse the transaction immediately, if the complaint is lodged within 40 days of the money being deducted; or
* If the complaint is lodged later than 40 days after the money was deducted, give the bank of the organisation that put through the debit order 30 days' notice of its intention to reverse the transaction. If the organisation's bank fails to prove the validity of the transaction to your bank's satisfaction, then your bank may reverse the transaction immediately.
The safeguards for you are that the debit system user (the organisation that deducts money from your account):
* May not debit your account without your written authority;
* May not transfer its rights to another person or organisation; and
* Must produce auditor's certificates at 12-monthly intervals confirming the existence of its authority to debit your bank account.
If you have given the user and your bank notice to revoke a debit order that has gone off your account, your bank is obliged to keep a check on debits going through your account.