As consumer lawyers, we often help consumers cancel their contracts with service providers. We often find that recalcitrant service providers (or ones whose admin is in disarray) don’t cancel the debit order instruction when the contract is cancelled. What can a consumer do to stop money which is not due, from going off their account?
In this three part series we’ll explain:
- Debit orders- the old and new (Debicheck) and what this means for consumers;
- How to reverse / dispute a debit order and or Debicheck mandate;
- PASA and their rules and our advice to consumers.
A debit order can be defined as a facility in terms of which someone can collect money from your account without you as a consumer having to do anything other than giving this mandate – such a mandate can be in electronic, written or verbal form.
Once you have provided the required mandate, you do not have to do anything further and the third party will then be able to deduct from your nominated account the agreed upon amount on the agreed upon date and for the agreed upon period. The consumer therefor does not have to worry about going to a bank or ATM to make the required payments and this obviously saves the consumer a lot of time and effort.
- Debit orders – the old and the new (Debicheck) and what this means for consumers:
Without going into too much technical detail regarding how each such debit order works, the different types of debit orders are the following:
- AEDO – Authenticated Early Debit Orders in terms of which consumers are able to authorise future deductions from their bank accounts for the payment of services and / or credit at a point of sale by swiping their Debit Card and entering their Personal Identification Number (PIN). This type of debit order is authorised by the consumer in person and can only take place at a place where the customer is able to swipe their debit card and enter their PIN and cannot be authenticated via internet or telephonic mandates. Due to this kind of debit order being authorised by the customer in person, they cannot be reverse.
- NAEDO – Non Authenticated Early Debit Orders which are basically the same as an AEDO debit order without the PIN authentication.
Both Authenticated and Non-Authenticated Early Debit Orders are processed as close as possible to your salary date. They are processed randomly and in a non-preferential way so as to provide every creditor with an equal opportunity to deduct funds. The maximum amount which a single AEDO or NAEDO may collect is capped at R15 000.00.
Both these types of debit orders may also have tracking included which simply means that should there not be sufficient funds available in the account on the agreed date, that the debit order will track in the background and be triggered as soon as funds are deposited into the account.
Debit order problems:
- Consumers were having difficulty in identifying the creditor in respect of debit orders going off their accounts
- Many unscrupulous operators submitted invalid debit orders against consumers’ accounts, e.g
- On cancelled or expired agreements, or
- where consumers never approved any mandate, e.g the infamous R99 Debit Order scam
- An increase in unpaid debit orders
- An increase in invalid debit orders being disputed, and
- An increase in the amount of valid debit orders being disputed by customers in an attempt to manage their cash-flow.
In response, the Reserve Bank mandated the Payment Association of South Africa (PASA) to develop a new form of debit order: Debicheck.
A Debicheck debit order needs to be electronically confirmed by the consumer, on a once-off basis, with his / her bank. Its purpose is for you to confirm the details of the debit order with your bank before it is processed to your bank account which will prevent fraudulent debit orders from being processed.
A Debicheck debit order is initiated by the service provider with whom the consumer enters into a new agreement. The mandate is sent from the service provider’s bank to the consumer’s bank. The consumer then has the option to either accept or reject the mandate electronically. Upon acceptance of the mandate by the consumer, the Debicheck debit order will be implemented.
This video explains what a Debicheck debit order is: https://youtu.be/QTcx5o7FsO4
A Debicheck debit order mandate can be approved by a consumer:
- on their bank’s online banking services platform;
- on their bank’s mobile app;
- via USSD;
- at an ATM or
- by visiting their bank’s nearest branch.
Your bank will notify you of a Debicheck debit order which requires your approval using your cell phone number. If your number changes for any reason it’s a good idea to notify your bank immediately.
The idea behind the Debicheck is that no debit order may be submitted against a consumer’s account without the consumer having first accepted the relevant mandate. The mandate will contain information on:
- the amount to be deducted
- the date of the payment, and
- the period for which the deductions will be made.
Debicheck has a downside for consumer – it cannot, once the mandate has been validly accepted and submitted by the consumer, be reversed. This is intended to protect the servicer / credit provider.
Debicheck does not replace existing debit order mandates and is being rolled out in phases which means that not all the debit orders going off from your account need to be changed to Debicheck debit orders although some service / credit providers have undertaken processes to do so.
Look out for our next post in the series on 27 May 2022 for information on how to reverse, dispute and cancel debit orders.