Faster bank payments mean that money can be transferred within minutes. But mistakes are made and you may pay the wrong person. Here’s what to do if you send money to the wrong bank account
If you’ve made a mistake:
If you’ve paid the wrong person, it’s unlikely you’ll be able to ‘reverse’ the payment. That’s because payments are made so quickly. Once the payment has gone it usually can’t be retrieved.
What to do if you send money to the wrong bank account
If you realise you’ve paid the wrong account, your first step should be to contact your bank and to ask them to get the payment back for you. The bank can’t just take the money back; instead it will have to contact the person whose account you sent the money to and tell them that the payment was made in error.
SAVVY TIP: Some banks will ringfence the payment while it’s being disputed so that the money can’t be spent.
What do the banks do?
Different banks take a different approach when it comes to payments that have been made to the wrong account. This is what the banks have told me they do:
- Barclays: says it will attempt ‘best endeavours’ to resolve the issue for the customer. These may include forwarding correspondence to the account holder on the customer’s behalf.
- Lloyds Banking Group: says it will get in touch with the customer who’s wrongly received the money, if they also bank with Lloyds Banking Group. Or it will work with the bank whose customer has received the money. However it won’t freeze or ring fence the disputed amount.
- Nationwide: says it can get money back quicker than it used to. It says that if one of its customers receives money that it believes doesn’t belong to them, it can take the money back. It will contact the customer first to explain what it’s going to do. But even if the person says the money is theirs but Nationwide is satisfied it is not, the building society says it can debit their account.
- NatWest/RBS: says that it will act within 48 hours (in line with the Payments Council’s code of practice) and, if the customer who received the money wrongly consents to the money being repaid, can repay it within six working days from being notified there was a problem.
The customer who reported the mistake will be told what’s happening. It says that withdrawing the funds without the customer’s consent is an option. But the bank does see cases where there is a genuine dispute over whether the payment should have been made (rather than a mistake).
- Santander: says it will call and write to the person who’s received the payment wrongly if they also bank with Santander. The bank will then ask for permission to reverse the payment. If they don’t bank with Santander, they will contact the account holder’s bank with the same request.
Santander will also ring fence funds if they are still in the ‘wrong person’s account’ until they have heard from the person who’s received the money.
Code of practice on payments to wrong accounts
In May 2014 a code of practice was introduced. Most of the major banks and Coventry and Nationwide building societies have signed up to it. And there’s a timetable by which they have to investigate. It says:
- Your bank or building society should take action within two working days of being told about the problem.
- If a bank is unable to reclaim funds immediately, you’ll be told about this within a maximum of four weeks (twenty working days) from when the bank tries to get your money back. This could happen if the person you’ve paid by mistake claims the money is rightfully theirs.
- If the bank can’t get your money back, you’ll be told about the next steps you can take. That may mean taking court action against the person who claims the money is theirs.
- Banks and building societies are supposed ensure the design of online, mobile and telephone payment channels reduce the risk of a customer making a mistake. This might include asking you to input account details twice, having extra warnings about making sure you have the correct account details or asking you to check payment details that have not been used for some time so that they can be updated or deleted as necessary.
- If the bank doesn’t abide by the code, you can complain. You should initially complain to the bank in question, and then to the Financial Ombudsman Service, which is free to use.
SAVVY TIP: If you’ve made a payment to the wrong account, tell the Payments Council (now called UK Finance) about it by filling in an online form. They won’t be able to investigate or get your payment back, but it should tell them what banks are or aren’t doing to help their customers.
What happens behind the scenes?
The new code covers how your bank or building society should deal with you. There are several steps that your bank or building society should be doing:
- Your bank will contact the recipient’s bank.
- The recipient’s bank will ask the customer’s permission to withdraw the payment.
SAVVY TIP: The bank can’t take back the money that’s been wrongly paid because it only has your version of events to go on. As far as the bank is concerned, it’s possible that you and the person you’ve paid have had a dispute which is why you want the money back.
- (Hopefully) the payment will be returned to your bank account.
SAVVY TIP: The Payments Council, which represents the banks, says that, by law, banks have to make ‘reasonable efforts’ to recover the money on your behalf. So that means, for example, they shouldn’t just write to or contact the account holder once and leave it at that if they get no reply.
If you don’t get your money back
If your bank can’t get the money back or you feel it’s not making much effort on your behalf you should take these steps.
- Complain to your own bank. Ask them what they are doing to help you get your money back.
SAVVY TIP: The problem is that your bank won’t necessarily know who the payment has actually gone to. They normally only keep account numbers and sort codes and there’s no central database of bank accounts.
- You should then get in touch with the recipient’s bank. Ask them if they can tell you whose account the money was paid into. You may need to get what’s called a ‘Norwich Pharmacal Order’. This is an order that requires a company to disclose certain documents so you can take action against a third party (the person who’s kept your money).
SAVVY TIP: The bank may say that they can’t give you the name of the person who’s received your payment due to Data Protection laws, but I’ve checked with the Information Commissioner’s office and they say that this isn’t good enough. They say that if someone made a formal complaint to them, saying that they were unable to find out who had received the payment wrongly – and refused to hand it back, the Information Commissioner’s Office would look into the issue. They say that the Data Protection Act isn’t designed to get in the way of law enforcement (ie trying to take the account holder who’s holding onto your money to court).
- Complain to the Financial Ombudsman Service. If more than one bank is involved, you might be better off complaining to each of them and then to the Financial Ombudsman Service.
SAVVY TIP: It may be hard to pinpoint which bank isn’t pulling its weight. So by complaining to and about both, you’ll save time.
Doing a test payment
If you are planning to make a large payment by online or phone banking, it may be worth making a small ‘test’ payment (say £1 or so) first so you know it’s arrived safely.
Why mistakes can happen
Since 2009 banks have been able to rely solely on the account number and sort code when making payments. They don’t rely on names. This is partly because they could be expressed in several different ways and still be correct, such as Jane Smith, J Smith and J S Smith. If you’re making an online or phone banking payments, it’s up to you to get the sort code and account numbers correct.
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