Bank error in your favour. Collect £1,000

by Neil Faulkner on 17 August 2010  |  14 comments
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Find out what you are entitled to when you transfer money to the wrong account by accident, or when money is mistakenly transferred to yours.

Even if banking errors are quite rare, they will still affect a lot of people. For example, if just 0.01% of transactions are errors and we process one billion transactions a year. That would make around 100,000 errors, which might explain why there's a small stream of readers' complaints about banks' mistakes.

If you transfer money to the wrong account

Not all errors are the banks' fault. One small slip from us: typing a 9 instead of a 0, and we haven't sent our mortgage deposit to Clydesdale Bank but to a 16-year-old in Amble by the Sea, who mysteriously becomes the youngest yacht owner between here and Helsinki.

If you transfer money to the wrong current account, your bank should hopefully contact the other bank, which should contact its customer and ask him to refund the money. However, as it's not your bank's fault, that's as far as you can expect it to go if the customer ignores the refquest.

It's sometimes fair to get a refund

You can get lucky though. The complaints body, the Financial Ombudsman Service (FOS), recently wrote about a Mr D who mistakenly transferred £75 through the Internet to the wrong person by entering the wrong account number. Yet Mr D had got the name right, so he couldn't understand how the bank made the error.

The FOS examined the bank's processes. Banking industry guidance states that consumers should be warned if payments will be processed using just the account number and there was no such warning on the bank's website. It told the bank to reimburse Mr D.

Bank error in your favour – but not for long

It's not normally the bank's job to compensate you for loss through your own mistakes, but the FOS also takes the view that the bank is allowed to reclaim money that it pays you in error.

Recent question on this topic

• bluesky asks:

  If a financial institution gives you money is it yours?

  • 
    SoftwareBear answered "He should return the letter with a reply stating that the account is not his. No point withdrawing..."
  • 
    SmudgeButt answered "Most likely explanation is that you father's account was being looked at for some reason by the..."
  • Read more answers

When £1,000 was transferred to Mr A's account, the bank mistakenly duplicated the transaction and credited £2,000. Two weeks later the bank asked Mr A to repay the money, but he said he'd already spent it. The bank said it could accept ten instalments of £100. Mr A complained to the FOS.

The FOS didn't uphold Mr A's complaint. There was no evidence to suggest he expected more than £1,000, or more than one transfer, and yet a statement sent to him a few days after the transaction took place clearly showed two £1,000 credits on the same day with the same reference details.

An inconvenient truth

There are exceptions. Sometimes you can even get compensation if a bank credits money to your account in error.

Mrs V received a cheque for £103,960 after closing her savings account. A few days later, the bank asked her to return £1,460, due to miscalculated interest.

The FOS accepted Mrs V's point that the bank should have got its calculations right and that she was disappointed, but the error had not caused her any financial loss and the bank had quickly tried to correct its mistake. However, in recognition of the disappointment and inconvenience it caused her, the FOS said it should allow her to keep £50.

A holiday paid by the bank

In some circumstances, when banks make mistakes, you can collect more than a modest £50 in your favour.

Mrs M paid a cheque of £100 into her account and the bank credited £1,000. The customer later checked her balance through a cash machine and found a lot more money than she expected. She went into the branch and queried it with the cashier, who confirmed that was her correct bank balance.

Mrs M had recently retired and she knew another colleague received a significant tax rebate when he retired, so she presumed she too had been sent a rebate. Close to four months later the bank sent a demand for her to repay the money, but she had already spent it on a holiday with her niece. The bank wanted to set up a monthly repayment plan.

The FOS ruled that she didn't have to repay on the basis that it was reasonable for her to think that the money was hers, because the cashier had confirmed it. As she couldn't ordinarily afford the holiday (and therefore couldn't pay the money back easily), and as she had bought something with no resale value, the bank couldn't recover any money.

If an error occurs and you think that your bank is wholly or partially to blame, it's worth complaining. If that doesn't work you can complain to the FOS, who could award compensation. Your final recourse is to take your bank to court.

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