Mistaken electronic payments

What are your rights when your online funds transfer is credited to the wrong financial institution account (ie an account with a different account owner or account number than intended)?

The Banking Ombudsman discussed difficulties in recovering Internet banking payments when a mistake is made and the wrong account number is keyed in, despite the correct name being included in the on-screen instructions in a Bulletin(pdf) in 2003.

Why is there a problem? Can’t the transaction be reversed?

an electronic transfer is processed solely on the basis of the account number. This has the effect that, if the payer keys in the wrong account number the payment will be made but to the holder of the account number that has been keyed in. The mistake may only come to light when the intended recipient tells the payer that the payment has not been received. When the payer tries to find out where the payment has actually gone, he or she may be told that the recipient’s name cannot be released for reasons of confidentiality. Their bank may claim that it acted on the basis of the instructions it was given, that is, the account number.

The recipient’s bank may claim that it has no liability because it acted on the instructions it received from the payer’s bank. .. By the time the payer realises that the payment has gone astray, the recipient may have withdrawn and used the funds, with or without realising that there was a mistake.

Where the Banking and Financial Services Ombudsman has jurisdiction its approach is that "If the account name forms part of the instructions given by the payer to the paying bank then the bank will be in breach of mandate if it debits the account for a payment where the account name and number do not match, and will be liable to re-credit the account...

The receiving bank is in a position to check whether the account into which the payment was made matches the account name entered by the payer. It should do so as soon as it is alerted to the alleged mistake. It does not, in our view, breach its customer’s confidentiality if it merely confirms to the payer’s bank that the account number does not match the name provided by the payer.

The receiving bank is the recipient of a mistaken payment and on the face of it, where the mistake has been verified, it is liable to repay the funds, at least until the point in time that the funds have been withdrawn by its customer and it has, accordingly, accounted to its customer."

The matter could be complicated by specific account terms and conditions and whether or not the recipient has withdrawn the funds before the mistake is discovered.

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