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Fraudulent Direct Debits
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JackieSparkle
Posts: 12 Forumite

I manage a small charity and we have a bank account with HSBC. Over the past 2 weeks, three separate Direct Debits to insurance companies have been paid out the account. I haven't set these up and they haven't been authorised by the other signatories. Fortunately, the bank has dealt with it quickly by issuing an indemnity claim and refunding the money to the account within a few days. I asked the bank advisor to see if there were any more and she found that 11 fake DDs had been set up! These have all been cancelled now but she advised that it wasn't possible to guarantee it wouldn't happen again, as authorisation was not needed to set up a DD.
I'm not sure if there is any way to stop it happening without the bank stepping up but I would like to know how someone can make a financial gain out of this when the payment is going to a legitimate insurance company. Is it just mischief-making?
As we're a charity, we do need to make our payment details publicly available on booking forms and invoices.
Thanks for any advice.
I'm not sure if there is any way to stop it happening without the bank stepping up but I would like to know how someone can make a financial gain out of this when the payment is going to a legitimate insurance company. Is it just mischief-making?
As we're a charity, we do need to make our payment details publicly available on booking forms and invoices.
Thanks for any advice.
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Comments
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If these direct debits are to the same insurance company has a wrong account number been used?
Have you contacted the insurance company about this to check whether the DD was set up in the name of an individual or in the charity's name.0 -
There are 8 different companies, 11 separate DD instructions. I did contact one of the companies and was on the phone for a long time! They couldn't/wouldn't tell me the name it was made out to.0
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Given that your account details have to be made available there's little you can do to prevent unauthorised use like this other than to closely monitor the account and report anything unrecognised, which you have done and which has been quickly resolved. You could, and probably should, report it to Action Fraud, but you may never know who it was that did it.
https://www.actionfraud.police.uk/0 -
Thanks, I will. It sounds like it is mischief-making then.0
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Simple really some scroat gets a car insures it using false bank account details - if they are lucky at least one payment is made before they are found out.
To me it is more than mischief making and I would be reporting it to the police.
It could be you or me that these criminals crash into without valid insurance.0 -
I have never understood why banks set up new direct debits without explicit authorisation from the account holder. When an account holder is setting up a standing order or faster payment online, several banks text with an authorisation code to be entered online or require use of a debit card in a card reader to generate such a code. But they seem quite content to accept a direct debit instruction from someone else without question! Surely it would be simple to add such an extra check?
I know that the DD originator is supposed to have the customer's authorisation, but this doesn't need to be in writing - a DD can easily be set up by phone, so apart from fraud it's quite easy for mistakes to be made.
The account holder isn't even notified that a new DD is being set up, so the first s/he knows about it can easily be the statement arriving well after money is taken - all much too late. Yes, there's supposed to be a bank guarantee to refund, but that's hardly the point - prevention should be the aim.
But then I suppose this is only one of the many ways in which the banking system is extremely poor as regards security.0 -
Yes, there's supposed to be a bank guarantee to refund, but that's hardly the point - prevention should be the aim.
But then I suppose this is only one of the many ways in which the banking system is extremely poor as regards security.
I think it's more of an issue of convenience for both parties over the low probability of direct debit fraud.
Imagine the millions of additional and time consuming operations that specific authorisation of direct debits would involve - not everyone has an internet connection to their bank or go on every day and what does the company do if the direct debit does not get authorised in a timely manner?0
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