In May last year, some 22,000 Prudential customers suffered what was referred to as a “technical glitch” causing monies to be deducted in error from thousands of bank accounts. Even though the error was discovered and rectified within 24-hours, it clearly highlights the risk to the consumer in signing up for GIRO. Since many seniors grew up in the age of GIRO and have come to accept that as part of our normal financial life in Singapore, I think it is time we give GIRO a hard look. With all the payment systems available today, GIRO would be at the bottom of my list! Here’s why.
- By using GIRO, you give permission to the billing organization to debit your account with the your bank acting only an intermediary. The Association of Banks(ABS) defines GIRO as “a contractual relationship between a consumer and a BO [billing organisation]; banks are the intermediaries in this tripartite relationship, and help to effect authorised GIRO deductions“. In the digital age where many horrors can plague consumers such as hacking of private information, financial fraud and “technical glitches”, signing up for GIRO basically opens your bank account to your billing organization. And that has many risks! The question you should ask: Do you trust the billing organization? If the answer is no, do not sign up for GIRO.
- When I read the FAQ on “How do I terminate a GIRO arrangement”, it gave me a lot of reasons for concern. “Should you decide to terminate the GIRO arrangement, you must notify the BO, so that the BO would stop sending instruction to the bank to pay for your bill. At the same time, you should notify your bank so that the bank will not entertain any more requests from the BO to debit your account for payment to that particular BO. “ Unlike using a cheque where you can place a “stop order”, you do not the ability to do so with GIRO in most banks. The billing organisation seems to hold all the cards! As a consumer, I would expect better control from my bank as to disallowing third parties from debiting my account – and have the right to place a “stop order” at any time. This is not the case with GIRO. This is a lopsided arrangement where you give the billing organisation too much discretion – and why should you?
- Another point to note is that when you apply for a GIRO, there is no expiry date – that means the billing organization has the right to take money from your bank account — indefinitely until cancelled. And since you have to go back to the billing organization to cancel and some people may even forget to that, your GIRO authorization remains in force indefinitely. This is what ABS says that “inactive or dormant GIRO authorisations are not terminated automatically.”
- Can you call your bank to see if a GIRO has been terminated? Apparently not. The ABS says that “some BOs send a statement to confirm that the termination request is effected. You may also wish to contact the BO’s customer service centre to confirm the status of the GIRO termination. ” Interestingly, it say nothing about your bank’s responsibility or requirement to inform you of any change in your GIRO status.
Given the options and choices that are available today for online banking and digital payment, consumers should really look at other options that offer them better control over their personal bank accounts — and not sign away their rights to third party billing organizations to debit their bank account with little real time control over what happens next. There is a lot of innovation happening in payment systems that offers much greater control and real time transparency to the consumer. To me, that why the GIRO system that was started in 1984, is my last choice.