In direct debits, there is a standing order and recurring transactions. This happens when the issuer in cheque accounts and cardholder in credit cards have provided an agreement with a supplier or service provider to automatically debit billings on his credit card or cheque account. The debited amount is charged to the account holder’s account immediately upon demand. In credit cards, payment is due depending on the card holder’s choice of a payment scheme.
Either way, direct debits to the cardholders or the account owner’s account can be cancelled at any time whenever he chooses to cancel it. Upon cancellation, if wrongful charging or debiting continues without authorization and is successfully taken from the account, the account holder can demand refunds and have it credited as soon as the bank knows about the complaint.
This provision is provided for in the Banking Code, 2003 in order to protect the client from wrongful debits. In National Bank of Commerce v. National Westminster Bank, the bank made some entries on the plaintiff’s account which was disputed through a legal action. Although there was wrongful debiting, the plaintiff’s case against defendant was barred by statute of limitations because the plaintiff waited for at least 6 years to file a case against the defendant. Frauds in Cheques, Stopping and Cancellations of Payment Cheque frauds involves a criminal buying goods or services and paying for them with a stolen or counterfeit cheque.
The seller waits for the bank to confirm that the cheque has cleared and parts with the goods. The fraud is subsequently discovered as the funds are reclaimed where the typical fraudster will offer a cheque or bankers’ draft for more than the actual price of the goods. You are then asked to transfer the overpayment to a third party after three days of clearing. The cheque is not genuine yet the original owner may only discover that their money is missing from their account.
The seller is then asked by way of a legal procedure to return the amount to the original owner. In Gold Coin Joalliers SA v United Bank of Kuwait , a fraudster was able to acquire expensive watches by impersonating a customer of the bank. The customer beforehand upon misrepresentation of the fraudster had given out the original instructions to the bank to release the item to the fraudster and to accept the payments handed by the fraudster. The bank considered the instructions and released the items yet informed the client of the dishonored payment as a forgery.
The victim-customer sued the bank but it was upheld on appeal that the bank had no duty to the customer whose instructions were specific to release an item to the fraudster. Currently, the industry finds it easy to stop and identify 90% of all fraudulent cheques and has prevented customers and suppliers from losing cash. It is always wise to receive cheques only from a trusted source. High-value cheques should also be regarded with utmost care since stolen checks still run the risks of being reclaimed if it turns out to be stolen or counterfeit.
Checkbooks should also be kept in a safe place and missing checks should be reported immediately following discovery. Likewise, the increasing number of credit card fraud has brought forth a summary of client complaints. They are often perpetrated by criminals who got hold of credit card details after being revealed through receipts. The summary of incidences has brought forth laws that become a necessity in order to protect consumers and at the same time the suppliers and the credit providers.