The office of the Banking Adjudicator will be researching the use of debit orders and the banking industry's role in providing a safe and secure system of payment for consumers.
Typically, you have to cancel a debit order that you have signed with an organisation, not with the bank. The problem is that although a bank can reverse an unwanted debit order, nothing prevents an organisation from continuing to debit your account month after month against your wishes once it has your account details.
Neville Melville, the Banking Adjudicator, says the international trend is for ombudsmen and adjudicators to move away from a reactive, case-by-case approach to complaints and to move towards a more pro-active way of dealing with problems.
Although an ombudsman does not dictate policies and procedures, he or she can identify those that give rise to complaints and recommend improvements.
Recently Melville called on the banking industry to implement secure chip card technology and personal identification numbers (PINs) to protect you against credit card fraud. And he has also urged the banks to ensure that life cover is in place on all home loans on their books.
Currently, banks rely on a cardholder's signature on a receipt as proof that a transaction has been authorised.
"Our banks and their clients will continue to lose the fight against fraud until greater responsibility is assumed at the bank and merchant levels, and safeguards are developed that genuinely protect the consumer. At this point, I don't believe we've gone far enough," Melville says.
Layers of protection
South Africa's estimated 2.98 million debit cardholders are required to input their account type and PINs before transactions are authorised, giving them an added layer of protection. But credit cards remain highly susceptible to fraud.
When a credit card is stolen, the thief is invariably equipped to replace the signature on the reverse of the card with relative ease. Assuming the theft is not reported immediately, the thief would be able to abuse the facility because the agreement between the bank and merchant clearly states that if the signatures on the card and the voucher look alike, no further proof of identification is necessary.
"The introduction of the PIN would close this loophole," Melville says.
"While lost card protection - a facility aimed at insuring bank clients against the fraudulent use of their accounts - provides some security, it doesn't represent total peace of mind," Melville says.
Although still being debated, the financial services industry would like to make it compulsory for every client to have lost card protection at an annual fee. Lost card protection is currently voluntary.
However, the adjudicator is convinced such a move would be "a damp squib" until the fundamentals of fraudulent activity are addressed.
Earlier this year, Melville urged banks to conduct a comprehensive audit of all their home loans to ensure that homeowners have adequate life assurance. The failure to take out cover, or allowing cover to lapse, is causing homeowners emotional turmoil and financial hardship, he says.
Many families live under the misconception that a policy was taken out at the same time the bond was registered, only to discover on the death of their loved one that the policy was never issued. Sometimes a policy is issued but then lapses because the premiums are not paid. The problem is largely a result of poor communication between banks and their clients.