/ Money

Banks begin to move on misdirected payments

Close-up of cash

In September we spoke about the failure of banks to return money that’s accidentally been paid into the wrong account. Since then some banks have taken action to help their customers get their money back…

Which? reader Tony Moss entered one incorrect digit when trying to transfer £742 into his Royal Bank of Scotland account. As a result his money ended up in the loan account of someone who’d left the country, leaving their debts unsettled.

Despite complaining to both the Financial Ombudsman Service and small claims court it was only once Tony appeared on Nick Ferrari’s radio show on LBC and drew attention to his situation that his money was refunded by RBS.

After we exposed the lack of protection available to bank customers who misdirect payments, online banks began to take steps to improve things.

Banks change their T&Cs

Of the banks we spoke to, First Direct, HSBC and Nationwide said they would make changes to their terms and conditions. They’ll now make it clear to customers that mistaken payments can be returned.

Barclays, RBS and Santander told us they have no plans to change their terms, meaning customers’ rights remain unclear. And Lloyds has said it is looking into the issue.

It’s great to see three banks breaking ranks on this issue. Although we’ve yet to see how well these changes will work in practice, they appear to be committed to resolving this issue and clarifying customers’ rights. It would be nice if other banks took action too.

Your misdirected payments

In our last Convo, we asked you to tell us your experiences of misdirected payments. Paul shared his top tip to avoid any mishap:

‘If making a transfer from my bank (setting up payee) I always test that the money is going into the account it should by sending a transfer of £1, then if it goes to the wrong account you haven’t lost much.’

But Bridge_Coach raised a warning with this technique:

‘There is one problem that I have found when using this technique – several times, large payments have been blocked by the fraud department of the bank and I have had to go through a lengthy telephone process to prove my identity.’

Have you ever accidentally sent money into the wrong bank account? Was your bank helpful or was it left to you to get your money back?

Have you ever accidentally transferred money to the wrong account?

No - luckily not, touch wood (91%, 252 Votes)

Yes - and my bank helped me get it back (5%, 15 Votes)

Yes - but I didn't get any assistance from my bank (4%, 11 Votes)

Total Voters: 278

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Comments
Member

If you make a mistake when transferring money, and it ends up in another persons account, Ipresume you have to first prove that you did not intend to pay that person, otherwise it could be open to abuse. I do not see that sort of situation being the banks “fault” and that whilst they should do all they can to help, they may be unable to retrieve your money. Down to you. Be more careful?

Member

I agree with you, but I do think the banks could do more to prevent it from happening in the first place. Such as asking for the last name of the account holder as an additional check that it’s going to the right person perhaps?

Member

Last names can cause problems, because for many people, such as Hungarians or many Asians, the last name is the given name rather than the family name. A safer system would be the surname, but even that can vary, particularly when people marry or divorce. That’s why I suggest below that the precise account name should be quoted in the same way that the precise sort code and account number are quoted.

Member

I have never misdirected a payment, but it’s an easy mistake to make. I believe that this could be picked up if we use International Bank Account Numbers, which contain check digits to help spot errors.

Member

Absolutely spot-on. Eurozone countries are moving to IBANs, even for national payments; previously they used them only for cross-border payments. We should do the same in the UK, and while we’re at it, it would make sense for the UK to opt into Article 14 of Regulation (EC) No 924/2009 (as Sweden has) so that intra-EU cross-border payments to and from the UK are charged in the same way as a domestic Sterling payment (i.e. in practice free). There is no reason for cross-border payments to be charged differently from domestic payments. The Eurozone, Sweden and even non-EU Switzerland charge cross-border payments in the same way as domestic payments. There is no reason why the UK shouldn’t follow suit with the effect that all payments using IBANs would be free of charge to anywhere in the EU.

Member

As John has pointed out, our IBAN is on statements. If our banks are not using an established technology that could be very effective in preventing misdirected payments then there should be no question about refunding misdirected payments resulting from a minor error such as transposition of adjacent numbers. It might encourage the banks to roll-out use of IBANs for all transactions.

Member

Some good tips above: Post a one pound pilot payment [Paul referenced in the Intro] and Wavechange’s recommendation to use the IBAN [shown at the top of bank statements]. It is the risk of making a mistake that has inhibited me and no doubts lots of other people from doing transfers on line. I have only done a few on-line transfers and none recently; I cannot remember if it was possible to retain a printed record of the transfer details as evidence in the event that any error had been made within the banking system. So long as people take care with the digits, I don’t think the system is any more prone to error than sending a cheque in the post, and overall it’s a lot safer. I’m pleased that my bank is one of those that has a helpful attitude to putting things right.

Member
smike says:
29 November 2014

The banks should require you to enter the name of the account holder as well as the address.

This would solve the problem at a stroke, but would require due diligence by the bank to check that they matched, so don’t hold your breath.

Member

The banks already ask you to enter the name of the account holder, but it is not validated. You can enter “Mickey Mouse” if you want and the payment will still reach the entered sort code and account number. Entering the address wouldn’t help, because there are so many variations of how an address can be entered and it would fail validat