/ Money

Have you ever paid money into the wrong bank account?

misdirected bank payment

One slip is all it takes to transfer money into the wrong account and while your bank should help you, there are no guarantees you’ll get it back.

Our online survey of 2,059 members of the public found that one in ten (10%) people have made an accidental payment, and 16% lost some, or all of the money.

If you realise you’ve mistyped an account number or sort code, you can’t recall the payment, even if you notice the mistake immediately.

The best-case scenario is that the incorrect numbers won’t match an existing account (in which case the payment should bounce or sit in a holding account).

But, if the numbers correlate to a live account, you may have a fight on your hands to get your money back.

Will your bank help?

Banks aren’t legally liable to cover losses if the mistake was yours.

However, electronic payments are covered by the Credit Payment Recovery (CPR) process, which means:

  • a) Your bank/building society will take action within two working days of you reporting a misdirected payment.
  • b) It will contact the receiving bank on your behalf and, as long as there is no dispute, you can expect a refund within 20 working days.
  • c) If you report it within two months and there is clear evidence of a mistake, you have a good chance of getting your money back because the receiving bank can protect the money (i.e. prevent withdrawal) and return it to you, even if they don’t hear back from their customer.
  • d) After two months, the receiving bank needs formal consent from its customer to freeze or withdraw the money. If the recipient insists the money is theirs, or doesn’t respond at all, you may have no choice but to give up, or take court action.

Why can’t banks check?

If the account details entered don’t match the name of the payee, you might assume your bank could spot the error – but it can’t.

Even though banks usually ask for the recipient’s name, the payment is directed solely by the account number and sort code (just as the address and postcode directs a letter).

This is set to change, thanks to industry plans for ‘confirmation of payee’. This will finally let you check the name associated with the account details before any money leaves your account.

This could be achieved using a Paym-type solution, or through banks sharing information securely.

There’s no official delivery date, but it’s expected by 2020.

Should banks be doing more?

Banks could help protect their customers now – by reminding them at the point of payment that the account holder’s name won’t be checked.

During my research for this investigation, I was surprised to learn that some banks (Barclays, Clydesdale Bank, NatWest and Royal Bank of Scotland) also recycle old account numbers.

This could cause problems if you saved the details of a friend who no longer holds that account.

What do you think about the processes in place to deal with misdirected payments? Could banks do more to protect customers or is it down to the individual?

Comments
Member

Some time ago my bank paid me £600 in error. They didn’t notice it until the chap to whom they were supposed to be paying the money complained. They told me they had to remove it from my account since to keep it would be theft. Their words .

Seems the rules only apply to the banks mis-paying you.

Member

It is the individual’s responsibility, (in my view) to make sure they are using the right account details. On a new account, I transfer £1 initially to ensure it is safely received. But equally, the online transfer screen should make clear to the customer what information is used for the transfer – account number and sort code – and what isn’t (account name), and advise them of the consequences of making a mistake – just as you helpfully explain above. We do need to be careful with our money and not do things with it we do not understand.

Member

About ten years ago, I picked up the paying in book for an account that had been closed and paid money into that account in the bank. They accepted it and it was only a day or so later that I happened to look at the paying in book more closely. I telephoned and wrote to the bank informing them of my mistake and the money was found, placed in the correct account and I had a letter confirming that this had been done. Later on, a Power Of Attorney application was processed by a very helpful manager who went out of her way to make the process as painless as possible. That branch is now closed. It is my submission that those actually working in the banks are doing a really good job and it is only when one goes up the corporate scale that the system is worthy of most of the expletives that thrown at it.

Member

I am not aware of ever paying money into the wrong account. It has been said a thousand times that banks should check that the account number and sort code match with the payee’s name but this reasonable request has been ignored. The banks are failing to act responsibly.

If a mistake could have been spotted by checking against the payee’s name I believe that the customer should have their money refunded. Take it from the directors’ pay and we might see the banks moving a little faster to implement a more secure system. 🙂

Member

This is what we can expect if/when ‘confirmation of payee’ comes in – a way to check the name associated with the account details entered.

It’s not entirely clear why it’s taken so long to get the ball rolling on this, although I know The Payments Council (now Payments UK) has previously said that introducing a name-check would slow payments down (and might cause problems if the payee used their maiden name or their initials instead of their full name).

Member

Surely, if commercial payees want to get paid quickly and cheaply they will align their account names with their operational names. Otherwise they can carry on receiving cheques that they will then have to pay to transact and await clearance.

Member

Thanks Chiara. If the payment used the maiden name or initials that would flag up a possible error that needs to be investigated but in other cases the payment could go ahead with little chance that it would land up in the wrong account.

Had it been one or two banks that were delaying implementation of confirmation of payee there would be pressure on them to change, but the problem affects the banking sector. We have a similar issue in energy pricing where those who who have prepayment meters often pay more for their energy than the rest of us. This is due to change but only after it has been hurting the poor for decades.

Member

This request has not been ignored. It is not as simple as is assumed, as a visit to the Payments Council site will show. However, put “Confirmation of payee” into a search, and it will be found to be an active area. One aspect seems to be registering appropriate payee details; names can be used in different formats for example. Mobile phone number is one proposal.

The Guardian article explains in outline what is happening, and it is suggested that implementation could be earlier than 2020 – possibly 2018.

It would be useful if Which? were to either investigate what is happening, the obstacles and proposals, thoroughly and present them here or in the mag, or ask banking experts to summarise the situation.

Member

As I suggested it would be possible to confirm the payee for most transactions and investigate the others. If the banks were losing money I suspect that difficult problems would be tackled promptly. I wonder how many of the problems relate to elderly people whose sight is deteriorating.

A postman may be able to deliver a letter using a house name or number and the postcode, but hopefully they will check that the latter corresponds with the street name.

Member

Here is a Payments UK report about Confirmation of Payee. @chiara-cavaglieri I wonder if Which? could add this to the intro?
https://www.paymentsuk.org.uk/sites/default/files/REPORT%20World%20Class%20Payments%20-%20A%20focus%20on%20Confirmation%20of%20Payee.pdf

Member

It makes sense for the industry to aim for implementation in 2018 – to coincide with plans for ‘Open Banking’. See https://www.gov.uk/government/news/cma-paves-the-way-for-open-banking-revolution

Open Banking is going to force providers to share data securely (allowing consumers to manage their financial accounts from one central app) so it isn’t much of a stretch that this could also allow them to confirm the name matches the details before a payment goes through.

Member

It is the sender who needs to know the correct street name to go with the post code and number. The national database links all these together.

However, how does the postman know that the name on the letter will match that of the person whose letterbox he will pop the envelope through. This is the essence of the additional information needed for bank transfers, and that is what the industry is addressing.

This may not solve all of the problem. If the system, when you attempt to transfer money to an account, returns the query of the account holder’s name for you to check before you confirm the transfer, what if the transfer is a scam and the scammer uses, as they will, a very similar name? Will you always be vigilant to spot a minor discrepancy? Care by customers will always be needed.

Member

@chiara-cavaglieri, I think it might be worth pointing out that moving to the proposed “confirmation of payee” system is not a simple change that has been ignored. it would be unfair to demonise the banks; most of the world has the same problem and is addressing it to a greater or lesser degree, it would seem. The UK seems to be at the forefront. We should be supporting them in this.

Member

Malcolm – If ‘confirmation of payee’ is going to be introduced, this could and should have been done years ago. If one in ten has made an accidental payment the need is obvious.

What I said earlier was: ‘A postman may be able to deliver a letter using a house name or number and the postcode, but hopefully they will check that the latter corresponds with the street name.’

Member

It clearly is not a straightforward change, but there is no point, really, in looking backwards. We need to look to action now. I suspect the more recent fraudulent use of accounts had increased the awareness.

I simply pointed out that when delivering a letter, the postman does not know if it is going to be received by the recipient it is addressed to……..even when it is a “signed for” item I do not think the addressee personally has to sign, do they? Lack of security potentially. Should we address that? Name or shame? 🙂

Member

If an organisation – commercial or otherwise – is underperforming, past performance can be a useful indicator of what to expect in future unless there is pressure for change. 🙁 I expect banks to behave professionally and I am glad that Chiara has provided this Conversation

Member

The banks are grossly negligent in their numbering of accounts. When I was a student, years ago, the topic of check digits was regularly raised. This system ensures that you would have to mistype two digits, not just one, to have a payment sent to the wrong account. A quick web search shows that banks in other countries use check digits, but UK ones don’t. This sloppy and negligent behaviour indicates that UK banks should be made liable for the resulting problems.
I’ve only just seen (above) that some banks are reusing old account numbers. That’s scandalous!

Member
janis says:
18 February 2017

I have only recently realised that banks do NOT check the name of the payee. In this high tech age I fail to understand how that can be considered to be acceptable . The banks are apparently trying to put this right, but a solution is not expected until around 2020. This is definitely something which should be dealt with as a matter of urgency – has there really been no pressure on banks to sort this out?
Mind you, they were in no hurry to deal with the discrepancy between the date money was taken out of a bank account and the date it appeared in the recipients account so I should not be surprised at this failure to protect the consumer.

Member
Charles says:
18 February 2017

Some South African experiences:

A few days ago, I deposited money into a small organisation using information from an email the secretary sent me. The email contained her name but not that of the organisation, and the teller asked me to confirm the latter, which I did.

A couple of years ago, I deposited money into a government organisation which now uses a very different name in its publications, and I had put that new name on the deposit slip. Again, the teller, at a different bank, asked me to confirm the name.

Years ago, I received the monthly statement from my bank, and noticed a deposit, probably equivalent to about £70, which I didn’t recognise and thought was a mistake. I can’t remember if I was too busy at the time, or just too tired, but I didn’t feel like going to the trouble of querying it, so I did nothing. Then, when I received the next month’s statement, I saw that the bank had already corrected the error – and had done so before I had even spotted it.

So at least some banks do check, and do correct errors.

Member
David Male says:
19 February 2017

“One slip is all it takes…” is surely a tad Daily Mail-ish?

In any well-designed system (even in relatively primitive ones such as the punched-card machines that predated computers) any ‘Account Number’ will include a ‘check digit’. Any normal transcription ‘slips’, such as transposing digits would be immediately detected. Also, you would have to mistype at least 2 digits, and even then be very unlucky, for a ‘slip’ to be undetected.

Member

Ouch! Although I used “one slip” because you can transfer to the wrong account having entered just one digit incorrectly. Most banks and building societies have ‘modulus checking’ (a system that uses a ‘check digit’ to validate an account number) in place. Modulus checking can prevent a payment being sent to an account that doesn’t exist, but if a genuine account number and sort code are provided, it can’t verify whether an account belongs to the intended recipient.

Member

If it’s correct that a single slip can’t result in a transfer to an unintended account, that’s very good news – but I wish I were convinced. As David Male and I wrote above, check digits have been around for a long time. An article https://www.theguardian.com/money/2014/sep/27/current-account-transfer-money-first-direct-santander
in the Guardian a couple of years back does suggest there’s still a big problem caused by the complacency of banks.

Member

Sorry EEB, I said that a single-digit error can result in a transfer to an unintended account. I was responding to David Male’s comment which suggested the opposite.

Member

We should switch to IBANs, just like most of Europe. IBANs have built-in check digits to ensure that the entire sort code and account number are correct. Yes, there are more characters to type (or copy and paste) in total, but the upside is no mistyped account numbers. UK bank accounts already have IBANs, but UK banks negligently don’t allow anyone to enter IBANs for sending domestic UK payments.

Member

Perhaps Which? can ask Payments UK if it is this simple. It would be useful to have an industry representative contribute to this Convo, wouldn’t it?

Member

I did ask Payments UK about this back in January and received this response:

“There is no evidence that a change to IBAN would eliminate errors and, in any case, it would not be possible to change to IBAN without a major industry project that would take years to complete and have costs potentially running into hundreds of millions of pounds.

Member

@chiara-cavaglieri, Thanks for that information.

Member

Payments UK is a trade association representing the industry and not consumers. Maybe if we make the banks responsible for refunding misdirected payments unless they can demonstrate that the payment was made deliberately the banks might think again about using IBANs. I support NFH’s proposal.

Member

I do not expect banks to compensate me, or anyone else, (using my and your money of course) if I make a mistake. We have to stop always pushing our responsibilities onto someone else. If I transfer money for the first time, i move £1 as a check and then the balance.

Is it Payments Council being untruthful in the statement Chiara has reported?The industry is already working on introducing a third tier check, which could be with us next year.

Member

As NFH has pointed out, other countries use IBANs. Some shout that we should make Britain great again but that’s not going to happen when some companies drag their heels. 🙁

I have never lost a penny due to a misdirected payment but want to put an end to a problem that should have been consigned to the history books by now.

Member

Excuse me sticking my nose in here Wavechange + my ignorance ,Chiara states ” UK banks don’t support IBAN ” , then why is IBAN,s own website showing the UK as an IBAN SEPA country -heading= Register of countries using the IBAN standard ? : https://www.iban.com/structure.html I am sure you are going to point out my mistake ?

Member

Nose excused Duncan.

I have paid money to foreign accounts from my UK account and given an IBAN code for the transfer.

I presume it doesn’t work the other way around?

Member

Duncan – I think you have failed to guess that my ignorance is greater than your ignorance. 🙂
Maybe NFH could explain what is going on.

Member

You would think Alfa as the City is the World Banking capital that they would use this system of verification , even with Brexit the City isn’t going to be isolated as Russia has announced that its big bank -VTB- is going to “consolidate ” to Germany it is still keeping its headquarters in London. So is it a case of -we set the rules as the “Worlds Banker ” ??

Member

IBAN – as far as i know (which is very little) IBAN is used to make overseas transfers; this seems to be a bank identifier for the sender with the customer sort code and account number. I presume the Payments UK reply was in relation to UK transfers only.

Member

The feature of IBANs that is relevant to this discussion is the use of check digits that will identify a single digit error: https://en.wikipedia.org/wiki/International_Bank_Account_Number#Check_digits

Member

I was questioning the basis of the statement made by Payments UK. If work is already underway on a suitable method that could be introduced next year and the alternative would be very costly and take years then, if this is true, I would pick the former.

Member

https://www.paymentsuk.org.uk/policy/payments-industry-standards/iban
“The IBAN is calculated in such a way that it provides a guard against the accidental transposition of its characters/numbers and it can be checked or validated using our IBAN checker. However its validation does not guarantee that the bank code or account number is correct, nor does it guarantee that the account actually exists, or is live. “

Member

In a recent email from Which?
Could this be the key to preventing devastating bank transfer fraud?

The regulator has outlined plans to introduce Confirmation of Payee. This is a process to verify that you’re transferring money to the correct person before any cash leaves your account. So if the details don’t match what you’re expecting, something dodgy could be going on.

Over £100m was lost to bank transfer scams in the past six months. This new confirmation step could help people dodge fraudsters before it’s too late.

Introducing Confirmation of Payee is something we’ve been calling for, but it’s only voluntary for your bank to sign up.

Do you want your bank to sign up to Confirmation of Payee to help protect you from bank transfer scams?

This change or an alternative solution could have been implemented years ago. In the event of the payee’s name not being in the required format, the payment could simply delayed pending inspection, but the majority of payments would go through and the person making the payment protected from loss of their money. Knowing that payments could be delayed might encourage those expecting payment to make sure that the payee is well aware of the correct name to use.

Member

This change is going to happen. The past is gone. Reading the documents may explain why it is not, perhaps, the simple task some think.

For those concerned about making payments to the wrong account, either because they are not sure of the payee or in case they might mis-type a number, a number of us have suggested transferring £1 initially and checking with the payee that it has been received. Then transfer the remainder.

By all means let’s have a moan about a system we regard as in need of improvement but that does not stop us taking sensible precautions to transfer money safely, while we wait for the system to be improved.

Member

I have read the documents and maintain that the problem could have been dealt with long ago. Neither of us have lost money but spare a thought for those that have. Why should we have to wait years for regulators to sort out well established problems?