Debit order system a convenient service

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"It is important to note that banks fulfil the function of a payment facilitator. A debit order is therefore not a contract between the customer and the bank, but an agreement between the account holder and an external company," says Ethel Nyembe, head of Transactional Products and Services Business Banking at Standard Bank.

The recent attention paid to unauthorised debit orders appearing on customers' statements does not make this form of payment untrustworthy or inefficient, Nyembe says.

"Although the spotlight has recently been placed on unauthorised deductions through questionable debit orders, these incidents make up a small percentage of debit order transactions that are processed by banks.

"Disputes about debit orders often arise because there is no written mandate from the customer authorising the service provider to deduct a set amount for a certain period. Against this requirement, is the reality that more and more instructions for debit orders are being placed verbally with businesses that contact customers directly," says Nyembe.

Contact company

The first port of call for a customer disputing a debit order should therefore be directly to the company providing the service. This company should be able to prove, through a recorded conversation, that the debit order was verbally authorised. If the company originating the debit order cannot provide the necessary proof, the customer should then declare a dispute and request a refund of the money paid out.

"The best course of action, however, is to stress that a verbal exchange is not enough to authorise debit order transactions. Customers should insist that a written debit order mandate is sent through so it can be authorised in writing with both parties holding copies of the agreement," says Nyembe.

Once Standard Bank has been alerted by a customer about a potentially fraudulent debit order on an account, the following process is set in motion:

• If a dispute takes place within 40 days of the debit order going off the account, the bank refunds the money immediately.
  
• Standard Bank then sends the dispute to the 'sponsoring bank'- the bank with which the business benefiting from the debit order has an account.
  
• If the sponsoring bank can provide a valid mandate, the debit order is reinstated.
  
• If the sponsoring bank cannot provide a valid mandate, this bank is required to repay Standard Bank.
  
• In the event that the company benefiting from the debit order no longer exists, the sponsoring bank carries the financial loss.

"If a debit order is disputed after the 40 day limit, the sponsoring bank is given 30 days to respond. If they have not responded within this period, all debit order deductions must be returned to the account holder. If the company is no longer operating, the sponsoring bank again carries the loss."
"If a company does not have a valid mandate, Standard Bank would move to stop all further debit orders on instruction from their customer by instituting a stop payment," says Nyembe.

Customers should also be aware that in the event that a debit order has been signed and then cancelled, the onus of proving the cancellation and acquiring financial redress lies between the service provider and the customer. This is not a process in which the bank can get involved.