Next time you examine your bank statement check who is taking money out of your account.
A Cape Town company was recently taken to court after investigation by the police fraud unit showed it allegedly accessed clients' bank accounts and instituted unauthorised debit orders via the automatic Magtape banking system.
All the company apparently needed to do this was the client's bank name, bank account number and branch code. A simple once-off cheque payment could have provided this information.
Personal Finance asked Nedbank general manager Bob Wooddise how easy or difficult it was for companies to institute debit orders and who was responsible if things went wrong. He said, normally, companies would request a client's personal details on an application form, which, once signed, became an authorisation for the company to institute a debit order.
The details required by the company to do this were normally that which appeared on a client's cheque: the branch code, account number and name of the bank. However, Wooddise said, the company was still required to obtain a signature from the client agreeing to the debit order. Any debit order is valid from the date when a customer signed a contract with the company which states that it was a debit order.
Lack of a signature or a falsification of a signature on a contract which specified that it authorised a debit order "would be a different story", Nedbank said.
Banks keep tabs on debit orders by endorsing the company who applies with the bank to institute debit orders.
This, Wooddise said, meant that a company who wanted to institute debit orders had to be cleared by the bank or be given permission to do this.
The permission would also not apply to individual debit orders, but to a general authorisation. Such endorsements, he said, gave all banks the comfort that not anyone could action or institute debit orders.
If a debit order was not legally authorised by a client, the company who initiated the debit order would be ultimately responsible. And, the bank who endorsed (or permitted the company to institute debit orders) would have to accept the debits back within 30 days of the action date. Wooddise said most banks reflected debit orders as such on a client's bank statement with the actioning company's name.
It was therefore of the utmost importance for people to read and check their bank statements. "The risk of funds debited by debit order rests with the client whose responsibility it is to cancel such an instruction based on the contract signed with the supplying company," Wooddise said.