Online banking has revolutionised the way we manage our money yet one little mistake can leave consumers seriously out of pocket.
If you have ever transferred funds between your own accounts online, or perhaps paid a bill or friend, you'll be familiar with entering the recipient account details before confirming the transfer. But what happens if these details are entered incorrectly and the funds end up in the wrong hands?
It is an easy mistake to make yet not so easy to rectify. It can be a heart-stopping moment if you realise the error immediately, or you may not discover the blunder until the funds fail to arrive in the intended account. Mistakes can be made for a number of reasons, such as people failing to double-check digits or being given incorrect details by the intended recipent, or simply inexperienced computer users who are unfamiliar with online banking.
When the mistake is the fault of the bank, it is liable to refund you. However, the land lies differently if you provide the incorrect sort code or account number. "In this instance, the bank must make every reasonable effort to recover the money but they may charge a fee for doing so," explains Narinder Sandhu, a solicitor at Bracewell Law. "The bank will not, however, be liable for any losses suffered by you."
The Payments Council claims that such errors are rare but was unable to release exact numbers. It admitted that mistakes do happen and it is working to understand how, when and why customers make such errors to find ways to further reduce the likelihood of it happening, in addition to ways to help customers when things go wrong.
Yet in the meantime, consumers who make a mistake can find themselves in an incredibly stressful position with their funds sitting in a stranger's bank account, with neither their own bank or the recipient bank willing to take responsibility or help retrieve the funds.
A recent investigation by Money Mail revealed some true horror stories of such banking errors, including a customer who had a £7,000 payment in limbo after failing to provide a reference code when transferring funds from her Nationwide savings account to pay off the remainder of her mortgage with Santander.
After much stress the customer eventually had to track down an IT worker at one of the banks, who managed to find the cash for her and the money was returned by Santander.
Unfortunately rectifying these errors is not as simple as asking your bank to reverse the payment because the bank needs proof that the transaction was made in error in order to prevent fraud.
To retrieve mistakenly transferred funds, banks have to contact the recipient of the money. While this is fairly straightforward if they are a customer of the same bank, if they bank elsewhere there needs to be a communication chain between your bank, their bank, and the customer, which can easily break down.
Even when the person is tracked down, if they don't want the transaction to be reversed or, more commonly, simply refuses to speak to their bank, then tnothing else can be done.
Legally, they are not allowed to spend the money as there are rules that prevent someone benefiting from cash that they have received in their account by accident. However, little is done to police this rule in practice and data protection rules mean that the bank cannot disclose the identity of the person.
Therefore if you mistakenly receive funds into your account, do the decent thing and report it to your bank so that the error can be rectified.
What can you do
The vast majority of online banking errors are made without error and it is easily avoided by double checking the account details of the recipient. "Payments are processed only using the sort code and account number and getting them wrong is like sending a letter with the wrong address," said a spokesperson from the Payments Council.
However, if you do make a mistake it is crucial to act fast and call your bank as soon as possible. Give concise details of what happened and request a refund of the incorrectly transferred money. Take the name and job title of who you spoke to and the date of the call, and follow this up with a letter, keeping a copy for your own records.
If your bank does not deal with your complaint within 8 weeks from the date of your initial complaint letter, or has rejected the complaint stating that it is not their fault (because, for example, the mistake was your own) the next step is to forward the complaint to the Financial Ombudsman Service.
"Any decision made by the Ombudsman can be appealed, but if they reject it after the appeal stage, then your last resort would be to bring legal proceedings against your bank," explains Sandhu. "If you decide to do this, the claim can be brought as a breach of the Payment Services Regulations 2009."