Reclaiming online payments made to the wrong account

Find out what steps you can take to reclaim misdirected payments made from your internet banking account and how to avoid them in future.

Key points

  • If you accidentally miskey an account number or sort code, errant payments can't simply be reversed
  • Payments sent to a non-existent account will bounce back, but if you send money to a live account you need to act fast to try to get it back
  • Your bank and the recipient's bank will need to work together to notify the recipient and ask them to return the money

With more of us using internet and automated telephone banking for the day-to-day running of our current accounts, transferring money online is fast, convenient and largely safe.

But there’s one big danger with sending payments this way and that’s simple human error.

Put one wrong digit in the account number or sort code you enter and you could be in the nightmare situation of seeing thousands of pounds winging their way to the wrong recipient.

In the past there might have been little you could do to get your money back, but banks have now recognised the problem and a voluntary code is in place to give you a better chance of reclaiming your cash.

How do misdirected payments happen?

Payments to the wrong account happen when you inadvertently enter the wrong details to make a payment to someone using your telephone or online banking.Pound coins and a £5 note

With the rise of internet and automated telephone banking, customers are increasingly keying sort codes and account numbers of recipients themselves, which leaves room for mistakes and places the responsibility for these mistakes on their shoulders.

What’s more, the introduction of Faster Payment means electronic payments reach their destination almost instantly, so there’s no window of opportunity for payments to be stopped.

The best-case scenario if you enter incorrect details is that they’ll be for a non-existent account, in which case the payment should simply bounce back into your account within a few days.

Unfortunately, if you enter incorrect details that coincide with a genuine account number and sort code, the money will be duly sent and reclaiming it can be problematic.

Why is it so hard to get misdirected payments back?

When payments are accidentally sent to the wrong account, problems with getting it back often arise because in many cases a solution relies on two different banks working together.

Although your bank should take steps to investigate and try to get your money back, there’s no guarantee that it’ll be able to

To compound this, data protection laws can get in the way of identifying and contacting the recipient of the payment to ask for the money back.

Finally, although the recipient isn’t legally entitled to keep money that isn’t theirs, in practice it can be very difficult to compel them to give it back, particularly if they’ve spent it and taking the money from their account would leave them overdrawn.

To tackle these problems, in May 2014 the Payments Council published a voluntary code of best practice which most banks and building societies have signed up to.

On 26 January, 2016, the code was strengthened by a new procedure so that where the recipient doesn't dispute the return of funds, the money will be returned within 20 working days.

What will the banks do to help with misdirected payments?

Under the voluntary code, once you’ve notified your bank of a misdirected payment, it will:Wallet

  • Commence action within a maximum of two working days
  • Contact the receiving bank with a request to stop the money being mistakenly spent if your bank finds clear evidence of a mistake - this means the money will be returned within 20 working days as long as the recipient doesn't dispute your claim
  • Notify you within 20 working days of the outcome of its investigation if it can’t reclaim your funds immediately - for instance if the recipient disputes it
  • Give you clear and accurate information on your options if funds can’t be recovered through the standard process

This all means that, although your bank should take steps to investigate and try to get your money back, there’s no guarantee that it’ll be able to - in which case it should give you clear information on complaining to the Financial Ombudsman or taking court action against the recipient.

Steps to reclaim a misdirected payment

Unfortunately, payments to the wrong account can’t simply be reversed, so here’s what you need to do for the best chance of getting your money back.

  • If you’re unfortunate enough to mistype a digit and send a misdirected payment, act fast - the first thing to do is to contact your bank and tell it what’s happened as soon as you realise there’s been a mistake
  • Keep a note of everything that’s happened - who you spoke to, dates and the incorrect sort code or account number entered
  • According to the voluntary code, your bank should contact the recipient bank within a maximum of two working days so it can identify the recipient customer and notify them
  • Hopefully, the recipient will acknowledge the mistake and allow the money to be reclaimed and returned to you
  • If the recipient disputes the misdirected payment, your bank will have 20 days to investigate, and notify you of the action
  • If your bank hasn’t been able to reclaim the money, you’ll be given information on the next possible steps, which could include taking court action
  • If the amount is less than £10,000, you could take it to the Small Claims Court. If it’s more than this, you should seek legal advice

Minimise the risk of misdirected payments

When sending a large amount, why not pay a few pence first and check it’s been received before sending over the payment in full?

Another part of the voluntary code relates to making it much more difficult for misdirected payments to happen in the first place.

This may be, for example by asking you to input details twice, issuing warnings to check details and prompting you to double-check older repeat payments that haven’t been made for some time.

As well as this, there are some sensible measures you can take to make sure your online payments reach their intended recipients:

  • Double- or triple-check sort codes and account numbers - this is the information used to address your payment, not the name or a reference
  • Check you’ve input the right amount
  • Consider using Paym, which asks you to verify the recipient’s name as well
  • To be extra safe, when sending a large amount, why not pay a few pence first to set up the payee details and check it’s been received before sending over the payment in full?

What if I receive a payment I shouldn’t have?

If you find cash you’re not expecting in your account, you’re not legally required to notify your bank, but that doesn’t mean you should spend the money.

It’s not your money and it’s illegal to spend it, sooner or later someone’s likely to miss it... and if you don’t give it back you could find yourself on the sharp end of some legal action.

Instead, it’s wise (and honourable) to let your bank know about any unexpected payments so it can get it back to its rightful owner.

By Derri Dunn