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R99 auto-deduction for your bank account – Have you been caught?

Many people wouldn’t look twice at a R99 deduction from their bank account, if they check their statements at all. But be warned, this common human failing is being fully exploited by fraudulent companies in the latest banking scam involving debit orders.

The scam targets an alleged chink in the armour of banks, using so-called non-authenticated early debit orders (NAEDO) which are activated ahead of regular debit orders, allowing creditors to claim from debtors. Payment Association of SA (PASA) spokesman, Arif Ismail, said 170 000 cases of unauthorised debit orders, or 0.4% of the 31 million debit orders processed in total, were reported to them across the country every month. Not all were legitimate complaints, he pointed out. “NAEDO is a debit that comes off the system before regular debits, aimed at allowing creditors to collect from debtors,” he said. “NAEDO debits amount to about 14 million interbank transactions a month, valued at about R9 billion,” he added.

It would seem that the stance that banks have adopted is one of being unable to keep track of all agreements made by clients, and so approved the debit orders as a form of “good faith”. “Only after a problem has been reported can the banks act. The dispute ratio was 3% about 18 months ago, but has since risen to between 4 and 6%, and caught our attention,” Ismail commented. Ismail went on to say that the amounts were purposely kept small to avoid alerting victims via text messages from their banks. So unsuspecting victims who failed to regularly check their bank statements could find themselves significantly out of pocket by the time they finally realised they were being defrauded.
“Dahunny”, an FNB customer who lodged a complaint with consumer forum website Hello Peter in June, said “Een-nasie” debited R99 from his account on May 30. “I do not know this company, nor do I have any debt outstanding on my name. I want my money reversed because I did not give MY CONSENT nor did I APPROVE of any debits from EENASIE/NAEDO Collection.” The angry complainant said this was the second such incident, both involving companies allegedly in Durban. “Worse, RB Jacobs from FNB asks me if I had called NAEDO to establish why my account is debited. If I as a client do not have any debt-collection orders in my name, why should the onus be shifted on me, their client, to do the ‘investigation’? This is HIGHLY UNACCEPTABLE, and I am not a happy client.”

FNB responded to the message, saying they were investigating, but the matter was not indicated as closed according to the case status. Ismail said PASA would tighten its security in response to the growing number of complaints about unauthorised debit orders. Measures included telephonic and written permission to debit an account within 21 days, and a review process should a company dispute ratio rise above 0.5%. If the review revealed that the rules were not being complied with, the user had three months to ensure compliance. Failure to meet the requirements would see a company put on a debit order abuse list, and that company would then not be allowed to process debit orders for five years.

That is all fine and well, but, from a THG viewpoint, normal, everyday folk would do well to check their balances and statements carefully to avoid becoming victims. It must be added that, generally, the banks are aware of the problem and are usually willing to reverse dodgy transactions (after investigation) without too much fuss. There are, however, often additional fees involved to go with the hassle of fixing the problem, so customers often wind up on the losing end anyway.