Complaint about gaps in direct debit system outside our powers to consider

Categories:

Other, Fraud & scams, Payment method,

Summary:

In June 2025, Noah discovered unauthorised direct debits totalling about $19,000 had been taken from his business account from six different companies. The bank arranged for these to be refunded to him by the companies, but he complained that the direct debit system allowed payments to be set up by the companies without proper verification. He said this flaw in the system created the risk of fraud and placed too much responsibility on customers to identify and report unauthorised transactions.

Published:

June 2026

Our investigation

The bank processed the direct debits in line with industry practice. When Noah reported the transactions, the bank took steps to fix the problem and ensured the money was repaid. It also put a special measure in place to reduce the risk of a recurrence of the problem for Noah.

However, Noah maintained there were industry-wide weaknesses in the direct debit system. We do not have the power to require system-wide changes. Nonetheless, we explained Noah’s complaint to Payments NZ, which processes transactions between banks, and it acknowledged there were gaps in the direct debit system that allowed certain types of fraud to occur. It said it intended looking at ways to close the gaps. We reported this to Noah, adding that he could make a submission to the Ministry of Business, Innovation and Employment, which was consulting on the regulation of payment services.