It’s literally 24-hours after payday and your bank account is being hit by debit order collections left, right and centre! The attack is so vicious it feels like your cellphone is having a fit, brought on by a slew of uncontrollable SMS notifications – ‘It’s ok little fella, this too shall pass’.
Begrudgingly you pick up your cellphone to check its pulse (and to scan over the collection carnage). You are 50% poorer than you were at the beginning of the day, but for the most part it all seems to check out, except for one strange looking debit order for R650…
‘Wait a second, what is this?’
To make matters worse, it’s clear that whoever is running an unauthorised collection against your bank account is trying their very best to mask who they really are. You don’t ever recall giving Fast Legal Services (Pty) Ltd a mandate to take money from your bank account.
How does this even happen? Who are these people?
Now you have three very real problems on your hands:
- You are out of pocket for R650 which is going to leave a dent in your personal cash flow.
- You need to phone the bank to reverse the debit order.
- You need establish how this even happened.
If you have a gym contract, insurance policies and a cell phone contract with a South African Telecoms company, then you have at least one debit order running off your bank account each month.
The problem in the last few years is that debit order abuse, by unscrupulous companies, has become a major issue in South Africa!
It’s become such a problem that the Reserve Bank has stepped in and asked the Payments Association Of South Africa or PASA (industry watchdog) to come up with a solution.
If you have 90 seconds to spare right now, take a look at this video
If you don’t have the time or inclination, here is the lowdown on DebiCheck.
PASA’s solution to safeguard South Africans against debit order abuse is to introduce DebiCheck.
To cut a long story short, this is the proposed change:
Your bank will not be allowed to run a debit order against your account, unless they have verified this with you, and an official mandate has been created.
Let’s create a quick hypothetical scenario to better illustrate the process:
Loyiso recently found out he is going to be a dad. He’s been putting off taking out a life insurance policy for ages, but now that he has managed to free up R350 a month, it’s time to get his proverbial “house in order” and make sure his family is sorted out.
Loyiso finds the life insurer he wants to sign-up with and takes out the policy with a telesales agent over the phone.
Generally, this is how the process currently works – once Loyiso has confirmed his banking details and given a verbal authorisation to the life insurer, they can submit a debit order instruction and start collecting the contractual premium from his bank account.
DebiCheck will add an extra step of protection in for Loyiso.
What will now happen is that all companies, running collections, will need to comply with DebiCheck and rather than just being able to run a debit against Loyiso’s account, the insurance company’s bank will need to get hold of Loyiso’s bank to let them know they want to create a mandate to collect premiums.
Loyiso’s bank will then need to verify this with Loyiso first, before authorising a mandate to collect.
Naturally the bank cannot phone every client to confirm a mandate so it’s likely that the confirmation will need to be an electronic one, like an SMS or USSD.
Let’s get back to the scenario we have created.
At the point that Loyiso gives the insurer authority to debit his bank account and finalise the policy, the insurer will start the process of talking to Loyiso’s bank to get an official debit order mandate in place.
It can be immediate to your mobile device or may take up to 24 hours before Loyiso’s bank sends him the electronic verification notification. If Loyiso doesn’t act on that verification notification instruction, then the insurer will not have a mandate in place and will not be able to debit Loyiso’s bank account.
It’s fair to say that the roll-out of DebiCheck is in place to punish a few (and by that we mean companies that take chances running debit orders without real permission) and not the majority of companies that provide a real services and collect, using an efficient collection mechanism like a debit order.
Bottom line is that everyone is going to need to toe the line when DebiCheck finally rolls out later in 2019.
Here are a couple of FAQs worth running through. They were sourced directly from the DebiCheck website.
Q: What is the difference between DebiCheck debit orders and other debit orders?
A: DebiCheck debit orders are debit orders that you will confirm, electronically and on a once off basis. Its purpose is for you to confirm the details of the debit order with your bank before it is processed to your account. Other debit orders are not confirmed electronically.
Q: What does ‘electronically confirm’ mean?
A: To electronically confirm your debit order means that you confirm the details of your debit order on an electronic device such as your cell phone, your bank App, your personal computer or perhaps an ATM. Your bank will let you know which options are available for you to use.
Q: Why the need to electronically confirm debit orders?
A: It ensures that you are in control of and aware of debit orders being processed to your bank account.
A: It provides the company that you are dealing with, with the comfort of knowing that you have acknowledged and are aware of these debit orders.
A: It also allows your bank to record the debit order information and to check the information before they process the debit order to your account.
Q: Why is this important for me as a consumer?
A: DebiCheck puts you in control of the debit orders that you are able to confirm.
A: You will have the comfort of knowing that DebiCheck debit orders must be processed within the agreed conditions that you have confirmed.
Q: How is DebiCheck different from what we have now?
A: DebiCheck allows you to confirm the debit order information with your bank, at the start of the contract.
A: This means that your bank will now have a record of all DebiCheck debit orders and will be able to verify the information before the debit order is processed to your account.
A: Currently, banks do not have record of your debit orders and therefore cannot verify that the debit order information is correct before they process your debit order.
Q: How will this new system and its related processes affect me?
A: DebiCheck will require an additional action from you – electronically confirming the debit order information with your bank.
A: In many instances, your cell phone will be used for this confirmation, in which case you will need to make sure that your bank has your correct cell phone number. This is very important!
Q: How often will I need to confirm my DebiCheck debit order?
A: You will only need to confirm your debit order information at the start of the contract.
A: If the debit order information that you confirmed changes, your bank will ask you to confirm the new information.
Q: What do I need to do as a consumer?
A: For existing debit orders – nothing.
A: For new DebiCheck debit orders, you will need to check and confirm the new debit order information in the manner requested by your bank. This could either be in person (face-to-face), using online banking or your banking app or remotely by call centre or a request sent via your mobile phone.
Q: What education will I receive as a consumer to ensure I understand the process?
A: Your bank will have information handy to assist you with any questions you may have. You can also find more information on www.debicheck.co.za.
Q: Will all my debit orders have mandates?
A: All debit orders processed against your bank account must have mandates but may not necessarily be subject to DebiCheck confirmation.
A: No debit orders can be processed to your bank account without a mandate.
Q: How can I ensure all my debit orders are mandated?
A: It is important to remember that all debit orders must have mandates.
A: Check your bank statements regularly to ensure you are aware of all debit orders that are being processed to your account.
A: Also make sure that you have given a mandate for each of those debit orders. For DebiCheck debit orders, your bank will now also have an electronic confirmation of you agreeing with the debit order information of each mandate.
Q: Can I choose which debit orders must be electronically confirmed using DebiCheck?
A: As a consumer, unfortunately not.
A: Companies who use the debit order system choose whether they want to use DebiCheck, or not.
A: If they choose to use DebiCheck, you will receive an electronic request to confirm the debit order information. If not, you just need to ensure you have a signed paper or telephonically approved (voice) recorded mandate.
Q: Why can’t I use DebiCheck for ALL debit orders?
A: This is certainly a long-term goal for the South African Reserve Bank and the Payment Association of South Africa. Unfortunately, due to the number of debit orders and entities involved in these processes, this will have to be done in a phased approach.
Q: How do I know that the company that is debiting my bank account is part of the new system?
A: Debit orders requiring electronic confirmation with your bank are called DebiCheck debit orders. You can enquire from the company that your debit order is with, whether or not they are part of the DebiCheck system. If you are not required to electronically confirm the debit order information with your bank, at the start of your contract, the company that you are dealing with is not using DebiCheck for this debit order.
Q: What bank fees are associated with DebiCheck debit orders?
A: For more information on bank fees, please contact your bank directly.
Q: What are the telecommunication / cell phone costs associated with DebiCheck?
A: Telecommunication / cell phone costs will depend on a number of factors, for example whether you use the USSD option or your banking app to confirm the DebiCheck. It will also depend on your mobile network costs.
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Until next time.
The Wise About Life Team