Debit orders are one of the most convenient ways of paying accounts that occur on a monthly basis but Galia Durbach, CEO of Core Banking Solutions at FNB, says that it’s important to understand the implications of linking a debit order to a current account.

The process begins with the signing of a legal contract between you and your service provider, such as an insurance company, for the deduction of an agreed premium from your account on a regular basis; usually monthly. The contract contains your signature, payment reference and banking details. The insurance company in turn instructs your bank to debit the agreed amount from your account and pay it into their account.

“Your contract is not with the bank. All the bank is doing is carrying out your instruction to the insurance company to debit your bank account,” stresses Durbach.

Be careful
Convenient as it may be, Durbach warns that you should be careful not to sign a debit order agreement
unless you trust the company you are giving authority to. “Because you are giving the service provider a certain amount of control over your bank account, it is crucial that you confirm their credibility before you sign any agreement.”

Before you enter into a debit order agreement with a service provider company, make sure you clearly understand your rights and responsibilities, as listed below, to avoid problems in future.

What are your rights?

• When, for example, your premiums increase, the company will automatically adjust the debit order after informing you, if this was in the original contract or document you signed.
• The agreement can be cancelled by a written notification to the service provider. This is not the responsibility of the bank where you hold your account.
• The service provider may not change any of its rights with regard to a debit order agreement without permission from you.

Taking care of
debit orders
To ensure that things are running smoothly with your debit orders you should:

• Check your bank statement regularly to make sure that correct amounts are paid to your service provider.
• Ensure that you have sufficient funds in your account for the debit order to go through.
• If you decide to cancel the debit order you have to inform the company concerned.
• Read the debit order agreement well — it is a contract between you and the company, not the bank.
• Be careful not to sign a debit order agreement form unless you trust the company that you are giving authority to.
• Should something go wrong with your debit order, you need to contact the company you are paying. If they can’t help you, contact your bank.

Generally, debit orders represent a convenient form of payment and the vast majority of these transactions are processed without any difficulty. However, if you think something
has gone wrong with your debit order, for example a premium higher than that agreed is coming out of your account, it is advisable that you immediately query it with them.

If you feel the need to reverse the debit order, request a reversal from the bank. You may also request the bank to place a stop payment on the debit order.

Stop orders a safer option
If you are not comfortable with the idea of giving control to the insurance company, Durbach recommends a stop order or scheduled payment as a better option since you, not the company, are giving the instruction to your bank to process a debit to your account and pay it to a beneficiary. “With a stop order or scheduled payment you remain in control and can change or cancel the instruction whenever you feel the need to.”

While a stop order or scheduled payment may seem more appealing, Durbach says most companies don’t accept it where a regular payment like a monthly instalment is the core deal
between you and them. The risk of contracts being cancelled soon after being taken out because of non-payment is too great, so most companies prefer to have control over the collection of payments.

Durbach therefore recommends a stop order or scheduled payment for a recurring payment, like school fees, rent or paying your domestic worker’s salary. “The person will regularly receive the money, but you can change or cancel the payment at any time, when circumstances change.”

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Online Debit Order Processing

KNOWING the difference between a stop order and a debit order can save you money – and spare you inconvenience. Bank debit and stop orders are commonly used methods of paying regular expenses, but few customers realise debit orders are a lot cheaper than stop orders.

The one downside of paying by debit order, though, is that you have no control over how much the beneficiary is paid.

In the December 1997 edition of the You and Your Bank newsletter, Standard Bank explains the difference between debit and stop orders, and highlights the advantages and disadvantages of each payment method. Debit order

A debit order involves you authorising a third party (the beneficiary) to regularly debit your account.

The amount debited may, however, be adjusted by the beneficiary.

When, say, your insurance premium increases, the beneficiary (the insurance company) will automatically amend the debit order, and only then inform you in writing.

The contract of payment is between you and the beneficiary – the bank merely facilitates the transaction by allowing the debit order to go through your account.

If you cancel the debit order you have to notify the beneficiary. Any dispute must be resolved between you and the beneficiary.

Standard Bank says debit order beneficiaries are screened thoroughly and only reputable companies are allowed to process debits through a customer’s account.

Standard Bank charges R2.30 or R2.50 for a debit order payment. Stop order

If you make a payment by stop order, you instruct your bank in writing to debit your account with a specific amount regularly and to credit the account of the beneficiary.

The contract in this case is between you and your bank. To cancel or amend the stop order you must notify your bank.

A stop order costs more than a debit order because the bank has more administration work.

Standard Bank charges R4.50 for a stop order payment. Which to use?

The beneficiary is often the deciding factor on whether a debit order or a stop order is appropriate.

While debit orders are cheaper than stop orders, they can be used only where the beneficiaries are authorised by your bank to use the debit order system.

Companies on the debit order system will usually not accept payment by stop order.

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GCHQ bosses want to monitor every email and text message sent in Britain, and keep records of individuals’ internet use.

But the plans have been questioned by Cheltenham community leaders, who believe they would be a massive infringement of human rights.

According to reports, the Government’s surveillance centre, based at the ‘doughnut’ building in Benhall, has already been given up to £1 billion to fund the first stage of what would be the country’s biggest ever surveillance system.

Known as the Interception Modernisation Programme, the scheme would enable GCHQ, MI5 and MI6 personnel, and also police, to access complete information on every text, email and visit to a website made in this country.

It is understood the first stage would see hundreds of secret probes monitoring customers live on internet and mobile phone providers.

GCHQ officials, backed by MI6, have reportedly been attempting to persuade Whitehall to fund the project to its completion, at a potential cost of up to £12 billion.

More details are thought to be included in next month’s Queen’s speech although, the Home Office has stressed no formal decision had been taken.

Conservative councillor Jacky Fletcher, Cheltenham borough member for Benhall and The Reddings, said: “This would be a massive infringement of human rights.

“I am all in favour of policing and I believe there do need to be special measures in place to track terror suspects.

“But those measures already exist. You can get court orders to track messages and other things for limited periods of time.

“I genuinely believe that if you have nothing to hide you have nothing to fear, but I would like to know why they need to read and store all of these things.

“If this is being considered, I would hope that would be the same question everyone in the world needs answering.”

It is understood MI5 can currently conduct limited email and website intercepts but only under specific warrants from the Home Office.

Those in favour believe the measures are vital to track the so-called “friendship trees” in which separate terror cells make links and communicate with one another. However, many within the Treasury and Cabinet Office fear its cost and believe it could infringe human rights.

There are 18 million broadband internet connections in the UK, while 57 billion texts and three billion emails are sent each year.

Although they can be stored in temporary databases, MI5 claims finding specific information can be like looking for a needle in a haystack – and GCHQ hopes the Interception Modernisation Programme is the answer.

GCHQ was unavailable to comment. POST VIA

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