Debit orders are supposed to be a hassle-free way to ensure that regular or repeat payments are made, but many account holders have become victims.
How is a user able to debit an account after it has been cancelled?
Experts define a debit order as a contract between a client and a supplier, giving suppliers the right to withdraw funds from a client's account in return for goods or services.
In terms of this arrangement, the user enters into an agreement with the sponsoring bank wherein, among others, he or she warrants that all transactions initiated by him or her will be duly mandated by the relevant account holders.
The agreement states further that the user undertakes to refund the account holder should the account holder dispute the validity of the mandate on any future date.
Unlike a stop order where the mandate to make payment is given directly to the bank, banks are not directly involved in negotiating the debit order agreement.
They will therefore accept any debit processed against the account knowing that an agreement exists and with recourse to the user or his or her bank. This means that an obligation is placed on the user to ensure that he or she holds valid mandates, which may be asked for as proof by the bank.
How do we avoid such problems. Absa and other experts advise the following:
l Only sign a debit order if you are sure the company is trustworthy;
l Always check your monthly statements to ensure the correct amount was debited on the correct day;
l Contact your supplier immediately if there is a discrepancy. If you feel that you have been wrongly debited, register a dispute with your bank;
l Your bank will ask your supplier to produce the debit contract to prove that they have authority to debit your account;
l If no proper authority can be shown, the transaction will be cancelled and the funds returned to your account.