I was listening to yesterday's Radio 4 'Money Box',
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and one of the items was about how easy is to set up a Direct Debit on someone else's bank account. "Have the zombies got your savings? Direct debit fraud and how to keep your tenancy deposit safe." Unbelievably, all you need is the sort code and account number (something normally printed on cheques), and off you go. As a result, it is isn't that unusual to find a strange DD suddenly appearing in your bank statement. From the report, the banks have a very blasé attitude to the situation, and are happy to let it continue (stating that anyone defrauded will have their money refunded).
I'm not sure how true this is as from what I recall of when I've set up DDs and Standing Orders online, further information is required, such as a memorable phrase or an additional number generated by one of those 'PIN Sentry' devices. Nevertheless, the item is worth a quick 'listen again' (starts at 6:30 in).
But the point is that the fraudster don't get your money. In order to receive direct debits, you have to go through a very stringent approvals process and the chances of a fraudster doing that is close to zero.
So a fraudster can't get their hands directly on you money. All that a fraudster can do is to set up a direct debit from your account to that of a supplier in order to pay the bill for services supplied to the fraudster. But this is where the direct debit guarantee kicks in: if that happens then you will unequivocally and immediately be refunded in full by your bank and they in turn will claw back the money from the supplier that your account was used to pay.
The victim, in this scenario, is the supplier who has supplied the goods or service but been paid for them by the equivalent of a bouncing cheque. That's why one of the things that they're supposed to do before allowing a contrqact to be paid by direct debit is to ensure that they verify the identity of their customer. If they don't, the open themselves up to this kind of fraud and will quickly find themselves losing large sums of money.
The so-called "Fraud prevention expert" quoted on the website doesn't seem to understand it either. He says that "The banks are the guardians of our money. They should be making sure that anybody who takes it has the authority to do so." But that is precisely how it is. A bank will only give your money via DD to an organisation which is authorised to take it. But the banks can't ensure that the authorised organisations are not themselves being defrauded, which is what's happening in cases like this. All they can do is to ensure that, when fraud does happen, it's the DD recipient which is the loser and not the bank's customer. It's hard to see what more we can realistically ask the banks to do.
Obviously, if you happen to be the unfortunate account holder who has your account used as part of the fraud, then you will temporarily be out of pocket until the money is refunded. And, if it happens repeatedly (as was the case for one of the interviewees on the programme), then it's certainly a going to be a pain in the neck. But it really isn't as big a problem as the programme makes it appear. A few ancdotes don't add up to evidence of widespread abuse.
We could require them to obey an instruction from their client that no DD is to be set up on his account without the bank being provided with a written authority signed by himself.
It can take weeks. Meanwhile all your other DDs and cheques are bouncing, causing even more problems.
Which would remove a considerable amount of the utility of a DD, since it would no longer be possible to set one up online.
It doesn't take weeks. Once you report it, the money is back in your account in a matter of hours.
It may possibly take longer for anyone foolish enough to use a bank which doesn't have a 24x7 call centre, but that's hardly the fault of the DD system itself.
The solution is that organisations which are authorised to take direct debits should be more careful to avoid letting themselves be defrauded in this way. But there's always going to be a balance between making absolutely sure of a customer's identity and making it easy for people to use your service. Requiring things like proof of address (eg, by means of utility bills, bank statements and the like) before accepting a DD mandate would pretty much eliminate this kind of fraud. But who wants to go to all that hassle just to set up a magazine subscription?
The real question is, how prevalent is this kind of fraud? The fact that it can be done is well-known. But, in reality it's sufficiently valueless to the majority of potential fraudsters that it's equally uncommon for it to happen. The plural of "anecdote" is not "data"; to demonstrate that it's a problem which needs solving you need more than just a couple of interviewees on a radio show.
If you think that is "unbelievable" then I'd like to know which cave you have been living in for the last 30 years.
When they had to be paper forms, you did also need a signature (but those were easy enough to forge). But electronic ones have been available for at least 20 years, and I think closer to 30. And those have always only needed sort code and account number.
I think they are blase because it isn't actually all that common.
It is actually quite hard to set up *fraudulent* DDs, because only merchants authorised by their bank can set them up. And a significant number of complaints from customers will soon get that merchant barred from the service.
But how could a crook benefit from such a fraud? Direct Debits can only be set up in favour of large businesses, not individuals or small traders. Such large businesses cannot afford to set up DDs without consent - it would end up ruining them. Thus the only frauds that are likely to be perpetrated will be motivated by malicious intent, where the perpetrator wants to cause upset to the victim rather than for personal gain, and such upset will be a momentary thing, because the DD guarantee will result in the transaction being reversed immediately it is reported.
The utility to those people who put convenience above security, perhaps. Other people's priorities are the other way round, but the banks choose to cater only for the first group, for obvious reasons of self-interest.
Anyway, you can no longer claim that it's hard to see what more we can realistically ask the banks to do, since you've just been told exactly what they could do.
I know you to be wrong from my personal experience.
They cater for the first group because there are more of them.
My experience, and that of others in this thread, is that I am right. If you are the odd one out, then I would suggest that it's because in your case there were other factors involved.
In article , Big Les Wade wrote: }Mark Goodge posted }>But the banks can't ensure that the authorised organisations are not }>themselves being defrauded, which is what's happening in cases like }>this. All they can do is to ensure that, when fraud does happen, it's }>the DD recipient which is the loser and not the bank's customer. It's }>hard to see what more we can realistically ask the banks to do. } }We could require them to obey an instruction from their client that no }DD is to be set up on his account without the bank being provided with a }written authority signed by himself.
Because that would be unnecessarily costly and probably not profitable.
It is a fact that a DD reversal normally takes a matter of hours, if that. The occasions where it does not are those where other factors are involved. My suggestion that your case fell into the latter category is based on the information you have supplied to me. If it isn't accurate, that isn't my fault.
Try to explain this to my colleagues in Holland or Germany. The UK banking system needs relaxed or no regulation because the system is based on endemic fraud and manipulation (PPI, Libor, Payday Loans, QE, Financial repression, money laundering, tax elusion, how long have you got?).
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