A debit order is a transaction where a service provider can collect money from a consumer’s bank account without the consumer having to do anything other than give the service provider approval to do so. Debit orders are widely used to collect monthly premiums on life and investment policies, mortgage and car payments, medical aid subscriptions, etc. It provides the consumer with a cost-effective and convenient way to make payments.

An unpaid debit order is a debit order which is not completed due to a variety of reasons such as insufficient funds, account closed, account blocked, etc.

A stop order is an instruction that a consumer gives to their bank to make a series of future-dated recurring payments.

A debit order is an instruction that a consumer gives to a service provider to collect payment against the consumer’s account.

South Africa has two debit order systems; namely the legacy Electronic Funds Transfer (EFT) debit system and the more modern ISO 20022 based system branded as DebiCheck, which incorporates authorised and non-authorised transactions. Non-authorised transactions are currently allowed to be collected in the early processing window, albeit as a second priority to authorised transactions. The service to collect authorised transactions is called Authenticated Collections (AC) or DebiCheck and the service to collect non-authorised transactions is called the Registered Mandate Service (RMS).

A DebiCheck debit order is approved by the consumer with their bank, at the start of a new contract which has been signed with a service provider. DebiCheck is a way that the consumer can control how certain debit order collections are made from their bank account.

DebiCheck ensures that consumers are aware of debit orders being processed to their bank account. It also gives service providers the comfort of knowing that the consumer is aware of the debit order and that they have approved it.

It also allows the consumers’ bank to keep an electronic copy of the debit order mandate/information. The bank will know the details of what the consumer has agreed to with the service provider or company and will not allow a DebiCheck debit order to be processed outside the terms that have been agreed to by the consumer.

While acknowledging the importance and efficiency of debit orders to various sectors of the South African economy, PASA also recognised and sought to prevent two types of debit order abuse: rogue service providers who processed debit orders without consumer approval, and consumers who avoided paying valid debit orders by unfairly disputing these debit orders with their banks.

The DebiCheck solution, which allows approval of debit order mandates, has also proven to protect both consumers and service providers, in that collections done under an approved mandate cannot be unfairly disputed, while collections that do not meet the terms of the approved mandate will not be processed.

DebiCheck debit orders are approved by the consumer’s bank at the start of the agreement before money is withdrawn from their bank account. Other debit orders are not confirmed in this way, although a valid contract still needs to be in place.

This will happen in two instances:

• If the agreed collection date falls on a weekend or public holiday, the service provider could collect on the previous or next business day.

• If there are insufficient funds on the collection date, the consumer’s bank will process the debit order when sufficient funds reach the account.

Consumers can contact either their bank or the service provider that will be using DebiCheck for their debit orders. Alternatively, consumers can go to www.debicheck.co.za for more information.

There are some banks currently participating in DebiCheck and there are banks which do not participate yet. Click here for the participating banks and their contact details.

Not all service providers participate in DebiCheck. Consumers should clarify this with their service provider prior to concluding a debit order transaction.

• Service providers choose whether to use DebiCheck or EFT Debit.

• Service providers typically use EFT Debits for willing and able consumers who have a good track record of regular payments, as it is cost-effective and efficient. Service providers use DebiCheck where they are more concerned about being able to recover funds.

Consumers cannot choose which debit orders must be electronically approved. Companies who use the debit order system choose whether they want to use DebiCheck, or not. If they choose to use DebiCheck, consumers will receive an electronic request to approve the debit order electronic mandate request.

• The debit order systems are designed to be highly efficient and automated and give service providers an inexpensive and effective way of collecting payments from their customers.

• Banks do not have the information, authority or resources available to decide whether a collection was valid and in accordance with a specific mandate given by the consumer unless it has been processed as an approved mandate, where the consumer approved the agreed collection parameters, and the details of the mandate and approval are stored at the consumer’s bank.

• Where a mandate is approved, a bank has a level of certainty about the validity of the collection. As the bank can’t know if the service was cancelled after the debit order was approved, suspensions of mandates and prevention of all future collections against that mandate are allowed.

• In the absence of an approved mandate, a bank has no way of knowing whether there is an agreed mandate in place, and even requesting a copy of the mandate raises its own challenges – Is the signature valid? Did the customer subsequently attempt to cancel the service? Is this the latest version of the mandate? etc.

A ‘maximum amount’ value on an authorisation request to a payer is only presented in instances where a usage-based mandate is used. A usage-based mandate is a mandate where the amount payable varies according to the utilisation of a service or product and could vary. E.g. Monthly electricity and water usage. The supplier of the service often specifies a maximum limit for utilisation. The maximum amount would then be a value that aligns to that maximum utilisation of the service or product.

It is important that the maximum amount concept is clearly explained to the consumer by the service provider, prior to sending the mandate authorisation message.