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Who hath the debit order, hath the power Jun 2009 - Hilton Tarrant Abuse of debit order authority, whether negligently or intentional, seems rife. As power relations go, the consumer has a very short end indeed. Walk into a room full of people and most of them will have had a problem with a debit order at some time or another. Sure, they are convenient and mean you will not get caught paying bills late, but by signing a debit order, you are giving that institution authority to debit your account as they wish. After three "long years", Graeme Glass decided it was time to port to another cellular network. "I thought that the days of Virgin Mobile's bad service were over, but that was only the beginning," he recounts. His bank account was debited with his outstanding balance in February. "Unfortunately my bank account was subsequently debited again and again over the next two months," he adds. Glass had received confirmation that his account had been closed but somehow he was still being billed. David van Rensburg's* Internet Service Provider (ISP) decided to continue billing him for his modem, which he had elected to pay off over six months. The amount was paid off, but nine, ten months later he was still paying an "instalment". Grant Hendriks* cancelled his ISP account via the company's call centre and confirmed this with a signed fax. The usual subscription amount was debited the next month and he immediately contacted his bank and cancelled the debit order. Two months later, he was contacted by a legal firm representing the ISP who demanded he pay R550 for the previous month's subscription which was in "arrears". The ISP says that there is a possibility that it did not receive the cancellation fax, but agreed to refund double the amount it charged to the customer after the cancellation notice. Geoff Candy purchased a post-paid cell phone contract a few years ago. His debit orders went through fine for the first few months, but then, inexplicably, they stopped. For a period of six months, not a single debit was processed. He also had yet to receive a bill (via post or E-mail) from the cell phone company. Candy raised the debit order problem with the company, and eventually the MD intervened. He said that the issue was caused by a billing problem and that it "only affected about 2 000 clients". His options were to deposit the amount he owed at a bank branch, or to wait for the problem to be sorted out. The network did solve the problem, but did not inform any of the affected clients. It simply debited the full arrears amount. Candy and the other 2 000 clients were powerless to stop it. Pay, pay and pay again Similar tales are told by many South Africans who do business with Internet Service Providers, satellite TV services, or health clubs. While most erroneous penalties or double-billings are reversed quickly, unplanned debits can wreak havoc with someone's credit record, if there are insufficient funds in the account. These "failures" to pay are notched up in credit databases which could compromise future contracts or credit purchases. In two recent high-profile cases, Virgin Active and Liberty Life mistakenly double-debited tens of thousands of contract holders. The institutions reversed the transactions and Liberty even refunded bank charges incurred by its clients. Liberty also compensated clients for situations where other transactions were rejected. Clive Pillay, the Ombudsman for Banking Services, who is the last resort for consumers who have no joy trying to resolve matters with banks, says that while "many thousands of debit orders are processed each month, the number of complaints received is actually very small." Currently, "only about three percent of our complaints" are about debit orders, he says. The Ombudsman received almost 25 000 enquiries last year, and 3 620 case files were opened. This case load is down from a high of 5 478 in the previous year, which, according to its annual report, means "that the banks are becoming more proficient in solving customer problems before they escalate into full-blown disputes and are referred to us". However, anecdotal evidence suggests that customers are often surprised by debit order charges. Not everyone combs through each of the bills they receive monthly, and who knows what those "service fee" or "account plan" entries really mean, anyway? Because the amounts are often small, many probably fly below the radar. However, the sheer number of customers that are debited each month could make this a high-value problem, whether they are negligent errors or a deliberate ploy by unscrupulous companies. Banks duck skillfully No cell phone company or internet service provider would discuss the problem. South Africa's major banks also wash their hands of the situation. Two of the big four say that with debit orders the onus is on the consumer to ensure that they authorise only legitimate institutions. However, the banks stonewalled further enquiries. First National Bank did promise to respond in detail, but having had several weeks, by the time Brainstorm went to print, we'd heard nothing. A bank official who did not have authorisation to speak to the media did so anyway, saying that because debit order payment instructions are made by a third party, the banks simply follow these orders. Banks do not process debit orders without an instruction first. However, according to the Payment Association of South Africa (PASA), banks are in some ways liable, because they approve parties who are able to "collect funds, mandated by customers of the paying banks." Pillay, however, echoed the general view the banks expressed: "As long as you're dealing with a reputable company, there ought to be no problems." If there is a problem, the Ombudsman for Banking Services says that consumers have options: "If an authorised debit order goes through an incorrect account, or the incorrect amount is debited, there is a procedure in place to reverse and rectify these errors. "The bank customer can simply instruct his bank in writing to reverse the debit and as long as this instruction is issued within 40 days of the incorrect debit appearing on the customers statement, the bank will reverse it," he adds. PASA says that customers must sign a dispute form at the bank in which the customer declares the reason for the dispute. "If a dispute is registered with the bank of a customer within 40 days, the bank will credit the customer's account and return the debit to the user via the inter-bank system." Will, might, or should? Pillay says that customers also often "seek to cancel a debit order where they are in dispute with a service provider." When one of our sources tried this, he was told it had to be done personally, at a branch. "The bank could not produce any authorisation for the debit order, and claimed it needed none, since I 'must have signed a contract' with the third party." He told Brainstorm that it seemed he was the only person who had to prove his identity in order to access his account. "The customer service agent at the bank agreed that anyone with a debit order facility who also has my bank account number can debit the account," he says. "The agent told me they do not disclose account numbers, and it is my responsibility not to do so either. My account number is on all my invoices. How else, pray tell, do I get people to pay me?" Cancelling a debit order "is generally not a problem", says Pillay, "because the Code of Banking Practice contains the following provisions relating to debit orders: 'When you become a client and upon reasonable request, we will make available information to you on how your account works, including how debit orders work and how to stop/ cancel them.'" If only it were that easy. Debit dangers
Order to kill Because a debit order relates directly to an agreement between you and a creditor, you need to inform the creditor of the cancellation of a debit order in writing. This should prevent the creditor from placing a debit on your account after cancellation. But, in order to make sure the bank does not pay the creditor, you have to give your bank a "written stop payment instruction". Consumers are protected to some extent as your bank is "not entitled to give reasons to the creditor as to why the debit order was stopped". If you decide to later reinstate the debit order, you have to give the creditor a new debit order authorisation and cancel the stop payment instruction at your bank. The debit order will, however, be on the same terms. If you want to change terms, keep your stop payment instruction active on the old order and institute a new, amended one which the bank will pay. |