Taking on unauthorised debit orders – What DebiCheck can and can’t do

We recently covered the topic of debit order fraud in South Africa, and received a strong response from our readers.

Many recounted stories of how they were affected by unauthorised debit orders, while others stated that a solution to the problem lies with the DebiCheck system.

DebiCheck is a joint effort by the Payments Association of South Africa (PASA) and South Africa’s banks, following a request by the SA Reserve Bank (SARB) to solve issues around debit orders.

DebiCheck aims to eliminate unauthorised debit orders by requiring bank customers to electronically confirm new debit orders placed on their accounts.

“This means that your bank will now know the details of what you have agreed to and will not allow your DebiCheck to be processed outside the terms that you have confirmed,” stated the system’s website.

While this will prevent certain companies from placing new debit orders on your account without your permission, there is a caveat in DebiCheck’s rollout plan.

Consumers cannot select which companies use DebiCheck when placing a debit order on their account – companies must choose to use DebiCheck.

It is a long-term goal of the SARB and PASA for DebiCheck to be used on all debit orders, but “due to the number of debit orders and entities involved in these processes, this will have to be done in a phased approach”.

Does this mean that DebiCheck will not protect customers as intended?

MyBroadband spoke to PASA CEO Walter Volker about DebiCheck and its rollout in South Africa to find out.

Getting DebiCheck online

Volker told MyBroadband that DebiCheck is one of the largest interbank payment projects undertaken to date, and is essentially an entire ecosystem change.

This means many complexities and infrastructure changes.

“For these reasons, the project was structured for delivery in a phased approach over a period of two years, starting during the latter part of 2017,” said Volker.

“This means that not all companies participating in DebiCheck will start using DebiCheck at the same time, helping the system to stay stable and reliable.”

Banks and a small number of companies have started using DebiCheck and are currently monitoring its functionality, he said.

“The aim is to start bringing more companies onto the system towards July 2018.”

Early processing window

When the system is widespread, however, will the fact that companies have the option not to join the DebiCheck system mean banking customers are still at risk?

Volker said DebiCheck is being implemented for companies wanting to collect money in the early processing window.

“From October 2019, only DebiCheck debit orders will be processed early – all other debit orders will continue to be processed later during the day,” said Volker.

“One of the reasons for this approach is that the majority of disputes are currently being recorded in the early debit order space.”

He said that 1.6% of normal EFT debit orders are currently being disputed, whereas 9.5% of NAEDO (Non-Authenticated Early Debit Orders) are being disputed.

“This means a big part of our problem with rogue companies currently manifests in the early debit order space.”

Volker said that although unscrupulous companies may be able to process invalid debit orders through the normal debit order system, these will not be DebiCheck debit orders.

This means they will be processed later in the day, making the rate of collection considerably less.

“Consumers will still be able to dispute and reverse these debit orders. In time, DebiCheck may be extended to all debit orders,” said Volker.

He added that PASA and the banks are working on measures to curb debit order abuse, including stringent processes for allowing new users into the system, and methods to identify, investigate, and prosecute offenders.

Adding to the problem, however, is that many South Africans dispute debit orders with a valid mandate.

This is mainly due to cash flow issues.

“This behaviour is equally as bad and unacceptable, and we are working on processes to address this as well,” said Volker.

Now read: FNB drops fee to cancel unauthorised debit orders

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Taking on unauthorised debit orders – What DebiCheck can and can’t do