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online technical resource

payments credited to the wrong account - or released to the wrong person

summary

Payments are sometimes mistakenly credited to an account they were not intended for - or are released to the wrong person. The reasons for this can vary. But in the cases we see, the problem is typically caused by:

  • a mistake made by the person sending the money (for example, entering the wrong account number on a transfer form or online transaction, or unwittingly sending money to an old account number that has been reallocated by the bank to another customer);
  • a failure by the financial business handling the payment for the sender (for example, a bank making a mistake when copying down account information given by the consumer); or
  • a failure by the financial business receiving the payment (for example, a bank putting the money into the wrong account, or a money-transmission business not making sufficient checks before releasing the money to a third party).

Complaints where this happens are normally made about one of the financial businesses that handled the transaction by:

The nature of the complaint will differ, depending on who makes it.

a complaint by the person who sent the money

The person who sent the money will normally complain that the financial business that handled the payment on their behalf (usually a bank or money-transmission business) did something wrong, leading to the money being paid to the wrong account – or to the wrong person.

The money may have been sent by the consumer between accounts held by them at different financial businesses – or to a third party who the consumer wanted to pay.

Where the payment was made from – and to – a country within the European Economic Area (EEA), the consumer may also bring a complaint to us about a financial business that handled the receipt of the payment (provided it is a financial business covered by us).

This business will sometimes be connected to the financial business that handled the sending of the payment. But it could also be an entirely different business with which the consumer has no account or “customer” relationship.

Before we can decide whether a financial business was at fault, we need to be as sure as we reasonably can about what actually happened to the money and why. As well as the respective accounts of what each of the parties involved believe happened – and depending on the circumstances – we normally also need to ask for paperwork such as:

  • any forms or documentation completed in relation to the payment;
  • an audit trail for the payment; and
  • copies of communications between the consumer and the financial business they are complaining about – in relation to the payment.

Once we have formed a view about what actually happened, we need to decide whether or not the problem was caused by something the financial business did wrong. In assessing this, we will take account of any relevant requirements such as:

  • industry codes or accepted good practice, in force at the time the payment was made; and
  • any relevant sections of the Payment Services Regulations.

We may find that the problem started because of something the consumer themselves did wrong – perhaps making a mistake when entering the account number. This does not, in itself, automatically mean that we will not uphold the complaint.

The Association for Payment Clearing Services (APACS) – now called UK Payments Administration – published some best practice guidelines in 2007. These say that businesses should make it clear to consumers that the sort code and account number ("unique identifiers") are used to process the payment – rather than the name of the payee, which most businesses do not check.

"This may be done by a short prominent warning:

  • on the payment form;
  • on the screen for electronic payments; or
  • another method according to the institution's risk policy."

So in cases where the problem has been caused by the consumer's mistake, we consider whether the business made it clear to the consumer that only the "unique identifiers" would be used to process the payment.

In these circumstances, we may also need to consider issues such as these:

  • From what the financial business knew, should it have realised that the consumer had made a mistake?
  • Once the problem came to light, did the financial business take reasonable steps to try to stop the money being “misapplied” – or to get it back from the recipient?

If we decide that the financial business was at fault in the way it handled matters, we consider what the consumer’s financial position should have been, if the financial business had acted correctly. This will normally be the basis on which we calculate compensation for financial loss.

In some cases, the consumer will be claiming for losses in excess of the payment that was “misapplied” or released wrongly. For example, they may have incurred some penalty – or lost some additional financial benefit – because the payment did not get to the right beneficiary.

This usually means we need to ask the consumer about the underlying transaction – so that we can get to the bottom of what impact the business had in handling things wrongly. In simple terms, the general legal position is that the financial business will normally be liable only for loss that resulted from its failure – and for loss that it could reasonably have foreseen from what it knew at the time.

If we decide in a consumer’s favour, we will also consider whether they were caused any non-financial loss by what happened – for example, inconvenience, embarrassment, distress or loss of standing. If so, we will assess appropriate compensation for that, in line with our usual approach to non-financial loss.

a complaint by the person who was meant to receive the money

The person who was intended to receive the money will often complain that the financial business that handled the receipt of the payment did something wrong, leading to the money being paid to the wrong account - or to the wrong person.

Where the payment was made from - and to - a country within the European Economic Area (EEA), the consumer may also bring a complaint to us about the financial business that handled the sending of the payment, if they feel that the problem was caused there. In either case, the financial business must be one that we cover.

Before we can decide whether a financial business was at fault, we will gather information so that we can be as sure as we reasonably can about what actually happened to the money and why. As well as the respective accounts of what each of the parties involved believe happened - and depending on the circumstances - we normally also need to ask for paperwork such as:

  • any forms or documentation completed in relation to the payment;
  • an audit trail for the payment (including copies of any documents used to prove identity, where the money has been paid out in cash); and
  • copies of communications between the consumer and the financial business - in relation to the payment.

Once we have formed a view about what actually happened, we need to decide whether or not the problem was caused by something the financial business did wrong. In assessing this, we will take account of any relevant requirements such as:

  • any relevant law;
  • any relevant industry codes or accepted good practice, in force at the time the payment was made; and
  • any relevant sections of the Payment Services Regulations.

We may find that the problem started because of something the consumer (or the sender) did wrong - perhaps making a mistake when entering an account or reference number. This does not, in itself, automatically mean that we will not uphold the complaint. In these circumstances, we may also need to consider issues such as these:

  • From what the financial business knew, should it have realised that a mistake had been made?
  • Once the problem came to light, did the financial business take reasonable steps to try to stop the money being "misapplied" - or to get it back to the rightful recipient?

Where the money has been transferred into the account of the wrong person, we are likely to ask for information about that person and any communication the financial business has had with them. Because that person is entitled to privacy, we may need to keep some details confidential.

If we decide that the financial business was at fault in the way it handled things, we need to consider what the consumer's financial position should have been, if the financial business had acted correctly. This will normally be the basis on which we calculate compensation for financial loss.

In some cases, the consumer will be claiming for losses in excess of the payment that was "misapplied" or released wrongly. For example, they may have incurred some penalty - or lost some additional financial benefit - because the payment did not get to the right beneficiary.

This usually means we need to ask the consumer about the underlying transaction - so that we can get to the bottom of what impact the business had in handling things wrongly. In simple terms, the general legal position is that the financial business will normally be liable only for loss that resulted from its failure - and for loss that it could reasonably have foreseen from what it knew at the time.

If we decide in the consumer's favour, we will also consider whether the consumer was caused any non-financial loss by what happened - for example, inconvenience, embarrassment, distress or loss of standing. If so, we will assess appropriate compensation for that, in line with our usual approach to non-financial loss.

a complaint by a person who had money mistakenly put into their account

We sometimes receive complaints from consumers who have had money wrongly paid into their account - because of some mistake either by the sender of the funds or by one of the financial businesses who handled the sending or receipt of the money.

The problem often comes to light when the consumer's own bank or building society tells them about the mistake - and asks for their consent to take the money back out of their account, so that it can be paid to the person it was intended for.

Put simply, the general legal position is that someone who is given money by mistake should say what has happened and pay it back. But this may not be what consumers hear from friends or on the internet - where the informal advice might wrongly suggest that this is a case of "finders keepers".

Consumers also sometimes wrongly assume that the bank itself will have to pay the true beneficiary - and that as long as they keep quiet, they will be entitled to keep the money if it is not noticed within a certain time.

If it appears to us that the problem has been caused because the consumer is mistaken about their entitlement to the money, then we will explain the position. Because of our impartial standing, consumers will often accept the position when we explain it to them - even if they were reluctant to do so before.

But the position is not always as simple as this. The consumer may sometimes not have noticed that they had received money by mistake - perhaps because the amount did not stand out from other transactions in their account, or because they had wrongly identified it as a payment they were expecting. By the time the mistake comes to light, the consumer may have spent some or all of the money.

Where we are satisfied that the consumer had in all honesty not realised that the money was not intended for them, we will generally look to see what they did with the money before the mistake was noticed.

We will normally uphold complaints like this only where the consumer's position changed in such a way that it would be unfair for them now to have to pay back some or all of the money. To decide whether this has happened, we are likely to need to ask the consumer for details about their wider financial situation - so that we can fairly assess the impact on them of what has happened.

Where we believe there is no reason why the consumer should not, in all fairness, be asked to pay back the money, we expect the financial business to allow them to do so in a way that does not cause them financial hardship.

The decision we make in these situations is intended to provide a fair outcome for the particular case in question - reflecting its individual facts and circumstances. So the outcome might, for example, include one or more of the following:

  • the consumer must pay the financial business back all the money, but should be allowed to do so by interest-free instalments over time;
  • the consumer should receive compensation for the upset and inconvenience caused to them by the financial business's mistake;
  • the consumer is not required to pay the financial business back some of the money; and/or
  • the consumer is not required to pay the financial business back any of the money.

This is part of our online technical resource which sets out our general approach to complaints about a wide range of financial products and issues. We would like your feedback on how helpful you found it. Please also use the feedback form below to tell us about anything you think we could clarify or explain better.

image: bank statement
  • The law requires us to decide each case on the basis of our existing powers and what is fair in the circumstances of that particular case.
    We take into account the law, regulators' rules and guidance, relevant codes and good industry practice at the relevant time.
    We do not have power to make rules for financial businesses.
    Our current approach may develop in the light of circumstances disclosed by further cases we receive.
    We may decide that fairness requires a different approach in a particular case.