This raises questions about why the banks do not do more to protect their customers.
One argument is that there is no negative incentive for banks to clean up the debit order system. As the inquiry showed, banks make more money from rejected debit orders than those that are paid. The average cost to the bank of a returned debit order is about R3,50.
Banks argue that higher fees are needed to encourage customers to meet their obligations and that without high penalty fees the debit order system would be undermined. Yet Capitec Bank, which deals primarily with low-end income earners, is able to charge R3,50 for a returned debit order with no systemic risk.
Absa has not experienced an increase in non-payment since reducing penalty fees. So who exactly are the banks trying to protect ** their retail client or corporate client?
The panel observed that banks see themselves in the "role of protectors of the collecting customer by penalising their own account-holding customers".
Somewhere along the line the banks have forgotten who their clients are. In an attempt to protect their corporate base, banks talk about protecting contracts and the rights of the provider. Comments that penalty fees ensure customers do not default on their contracts and that the bank cannot cancel a debit order as it interferes with the provider's contract point to the fact that it is the corporate client, not the retail client, that matters.
As the report reminds us, it is up to the service provider to ensure that the person who signs the contract is creditworthy, not the customer's bank.
The increase in revenue from penalty fees would suggest that service providers are not carrying out their job of vetting their customers. And why should they? There is no disincentive for the provider to sign up a non-payer on the system as it is the customer, not the provider, who pays the penalties.
Volker believes that the banks need to work more closely to root out this behaviour. He argues that if a particular service provider results in complaints, the provider should be blacklisted and any bank that continues to provide a platform to the company should be fined.