How to stop illegal deductions from your bank account.
Almost on a daily basis, NAMFISA’s Complaints
Department receives and processes numerous complaints from consumers about the manner in which they are treated by providers of financial services and products. These complaints include refusal to pay
pension benefits, refusal to pay out insurance claims,
cancellation of contracts and illegal deductions.
For this edition, we will deal with the problem of illegal deductions, which has become a thorn in the flesh of many consumers of financial services. Some claim they have never authorised any third party to deduct money from their bank account via debit orders. Others have complained that the debit order deductions have continued way after they have settled debts or paid accounts via debit order.
A debit order is an agreement between an individual and a company or a third party in which the individual authorises the company or third party to take money out of his or her banking account for services that entity provides to him or her. Debit orders may be for fixed or variable amounts.
The consumers who complain about illegal deductions normally allege that they have tried all they could but have found no joy in having the deductions cancelled.
Understandably, this has caused distress, discomfort and financial loss. People are forced to go and borrow money to make ends meet as the money that they have earned legitimate is being taken by other parties.
To ensure that customers do not suffer distress and are helped speedily, the Bank of Namibia, together with Bankers Association of Namibia, launched a Code of Banking Practice in which they, inter alia, advise the steps that consumers must take to have their situations rectified speedily.
The following are guidelines excerpted from the Code of Banking Practice to prevent illegal deductions from causing frustration and financial loss:
Use of Debit Orders
You may use debit orders as a means of payment for a range of services. A debit order is an instruction by you to a third party (including a bank) to allow that third party to collect a payment from your account on a regular basis (e.g. monthly or annually). You can choose whether it will be a fixed amount (e.g. a loan repayment) or a variable amount (e.g. monthly cell phone charges).
When completing your instruction, you should select a date for the debit order deduction on which you will always have sufficient funds to cover the amount to
be withdrawn (for example pay day). Ensuring that you have sufficient money to fund the debit order will enable you to avoid any penalty fees for rejected debit orders from the bank.
Stopping a Debit Order
You must cancel a debit order by providing written or other appropriate notification to the third party whom you authorised to make the deductions.
You may also stop a future debit order payment for a given period by requesting that your bank places a stop payment instruction on your account for the exact amount of the debit order.
Your bank will advise you regarding the period for which the stop payment instruction will be effective, and how it operates. You may also be charged a fee for implementing this stop payment instruction.
You must be aware of any impact cancelling or suspending a debit order payment may have on your contractual commitments with the third party.
Disputes about Debit Orders
You should report any disputes relating to your debit order to your bank.
In particular, you should raise a dispute when the
third party:
• Has withdrawn an amount before the date specified in your instruction;
• Continues to collect a debit order that you have cancelled or is subject to a stop payment instruction;
• Debits your account for an incorrect amount;
• Has collected a debit order you did not authorise or in a manner you did not authorise (e.g. split the collection amount or consolidate several debit orders); or
• Has collected a debit order that is not consistent with your instruction.
Your bank may request you to provide proof of identity and to confirm the dispute. If your bank determines that the debit order is not authorised by you, your bank may reverse the transaction and any related fees. You will not be able to dispute a debit order if the authorisation was done by you using your debit/cheque card and PIN.