Fat fingers? What to do if you send money to the wrong account
The first thing to do is not to panic – although you must inform your bank of the error as soon as possible.
A voluntary code was introduced by the UK Payments Council in April last year, which obliges banks to take action on misdirected payments within two days of a customer submitting a complaint.
Positively, most major banking groups and building societies are now subscribers to the code (a full list can be found here); unfortunately, the code does not guarantee that money transferred erroneously will be returned to its rightful owner.
If the account you mistakenly transferred money to is held at the same bank as you, retrieving the money is, potentially, a very simple matter. Your bank will contact the account holder to inform them of the mistake, and ask for a reverse payment to be made back to you. If they refuse, the bank can freeze the recipient’s account to prevent the funds being spent, and compel the recipient to agree to your money’s return.
Things are slightly less simple if the recipient account is held at a different bank, however. Under the terms of the voluntary code, it’s a recipient bank’s duty to contact a wrongly-endowed customer so the funds can be recovered; banks have two days to take action and inform the mistaken addressee of the error. Should that customer dispute the claim, a recipient bank then has five weeks to rectify the issue.
If the bank cannot resolve the problem, an account holder must contact the Financial Ombudsman Service (FOS). The FOS will then investigate the complaint; if they decide in the accuser’s favour, the FOS will instigate recovery proceedings. The FOS unambiguously consider spending money received in error to be illegal, and will treat wrongdoers accordingly. They will also consider whether the sender incurred any non-financial loss by the event (e.g. inconvenience, embarrassment, distress or loss of standing), and ensure they are compensated appropriately.
How can I avoid mistakes on electronic payments in the first place?
When you make an electronic payment, addressee names are not checked; only sort codes and account numbers are verified. According to Payments Council research, less than two-thirds of people (63 per cent) are aware of this.
This means you should scrupulously triple-check sort code and account number information when making a payment.
Several banks have indicated they are considering the introduction of failsafe systems to offer extra protection to customers making transfers (such as ‘double input’ provisions and name verification).
Regrettably, such safeguards are yet to materialise – for the time being, it really is a matter of being extremely cautious.
What should I do if I think I’ve received an erroneous payment?
While it would be nice if the rule of ‘finders keepers’ applied, the legal reality is quite different. If you have received money in error, you are obliged to not spend the money, to inform your bank as soon as possible, and to pay back the misdirected funds.
If you are transferred money erroneously and spend some or all of it accidentally, however, the FOS does offer protection and concessions to you. While you will be required to pay back the money in full, the FOS will ensure the repayment terms do not cause you hardship (for instance, via paying in interest-free instalments over time).