Banks have back-tracked on a promise to help you stop other people raiding your bank account via debit orders.
Currently, the only way you can stop prevent people or companies using a debit order to help themselves to money from your account is to close your account. You can reverse a debit order deduction, but to stop the debit order permanently you have to inform the company putting the debit orders through your account that you do not want to make the payments.
If the company does not co-operate, either because it is inefficient or because it believes that you still owe it money, the debit orders will continue and the money will be deducted from your account.
At a meeting of the Board of the Banking Council in August last year, bank executives agreed in principle that this should be changed and that clients should have the right to cancel debit orders by notifying their banks. The council set up a task team to look into the computer system implications and to work out in detail how clients could cancel a debit order directly with their bank.
But Bob Tucker, the chairman of the Banking Council, now says the board has decided not to continue with the development of a new system.
Debit orders can be an efficient way of making regular payments of varying amounts, relieving you of the need to remember to pay a bill every month.
But when the system is abused, it can prove extremely frustrating. Consumers can struggle for up to a year to stop an authorised deduction from their accounts.
And fraudsters who can get access to your bank details can abuse the debit order system to rob you by, for instance, putting multiple debit orders through your account and changing the amount of the deduction slightly so that the bank's computer system will regard each as a new debit order.
Tucker says banks cannot stop debit orders because clients have already provided banking details to the debit order users. A new system would, in any case, not stop a fraudulent user from using your details to debit your account, he says.
Also, allowing you to unilaterally cancel debit orders would introduce uncertainty into a system on which businesses and consumers rely heavily, he says, and people would find it increasingly difficult to acquire services, including credit, and products on instalments.
Tucker says no promises were made to account holders about changing the debit order system.
In any case, he says, only a minute fraction of the debits which pass through the system is unauthorised.
"Of an estimated 360 million debits a year, fewer than 10 000 are challenged and only 65 percent of those are valid challenges."
Given the low percentage of valid challenges - 0.002 percent - it would be very expensive and inefficient for banks to check every debit to see whether you gave a company authorisation to draw money from your account, Tucker says.
The Banking Council is satisfied that the problem will be resolved by holding the bank which allowed the debit order to go through liable for any losses you bear.
This places a responsibility on you to check your bank account and to refuse to accept any unauthorised debits.
Tucker says you should remember that it is you, and not your bank, who chose the debit order method. Your bank does not give your account information to debit order users. Bank staff have a duty to help you sort out any unauthorised debits on your account.
A banking task team is looking at other issues around debit orders, including:
* Ways of dealing with fraudulent users of the system;
* How mass unauthorised debits can be reversed; and
* How to get around the problem of misleading explanations on your bank statement which may lead you to believe that a particular deduction is a legitimate bank charge.
* The Financial Services Board has expressed concern about the abuse of the debit order system, but does not have jurisdiction over the banks.
Banks are policed by the Registrar of Banks, but he focuses only on prudential regulations concerning the bank's balance sheet.
Ways you can control debit orders
* When you sign a debit order in favour of a company you are giving that company carte blanche to dip into your account. Take great care when asked to sign debit orders;
* Make payments by other means, if possible. Your options are stop orders, electronic bank transfers or even cheques, although you pay high bank service fees for issuing cheques;
* Only sign debit orders with reputable companies;
*Read the authorisation form carefully;
* Add an expiry date to the form. This way the company won't be able to continue to draw money from your account forever; and
* Place a limit on the amount that can be deducted from your account but allow for fluctuating payments. For example, if your electricity account ranges from R200 in the summer months to R400 in winter months, specify an upper limit of R500 on the debit order form.
DEFINITIONS
A DEBIT ORDER is the authority you give to another person or company to deduct money that you owe from your bank account. The banks merely process the debit order. To put a stop to deductions, you have to cancel a debit order with the company involved.
A STOP ORDER is an instruction to your bank to pay a fixed amount to a person or company on a regular basis. You have full control over a stop order and can stop it at any time by notifying your bank.