Customer liable for unarranged overdraft resulting from scam

Categories:

Fraud and scams, Investment, Overdrafts,

Summary:

In 2023, Raul was caught up in an import scam after believing he had entered into a contract for vendor finance to fund an import venture. A scammer deposited $16,000 into his account and $50,000 into his wife's account. He and his wife transferred the funds through five different bank accounts, then to a remittance agency, then to his overseas bank account, and finally back to the vendor.

Published:

June 2025

The $66,000 he received was actually a Visa credit hold (where a Visa merchant had applied a credit to his card). The merchant did not finalise the credit and it was reversed out of his account, leaving him in an unarranged overdraft. The bank contacted Raul about the unarranged overdraft, and Raul explained the circumstances of the payment and queried how the funds could be reversed after he had moved them. The matter remained unresolved for a year, at which point the bank referred the debt to a collection agency.

When the collection agency contacted Raul, he lodged a claim against the company in the Disputes Tribunal, saying the debt was invalid because there was no credit contract. Because the debt was with the bank, the Disputes Tribunal joined the bank as a party to the claim. Raul complained to us, but our rules prevented us from investigating while legal proceedings against the bank were under way. Raul withdrew from the Disputes Tribunal action to allow us to investigate.

Our investigation

Raul did not have copies of any correspondence with the scammer, although the bank said it had relevant information on his wife's account that it could share, but his wife would not agree to be part of the complaint or allow the bank to share information with us about her account. We asked Raul why he had moved the money through so many accounts and why he had not tried to recover the money through his overseas bank, but he was unwilling or unable to provide satisfactory explanations.

We reviewed the bank's terms and conditions, which said deposits from foreign banks were treated as uncleared funds until actually received by the bank, and as such they could be dishonoured. In such circumstances, the terms and conditions allowed the bank to put his account into unarranged overdraft.

We looked at whether it was fair and reasonable for the bank to hold Raul liable for the overdraft. If a customer receives funds in good faith and acted in reliance on them, we may consider it unfair for the bank to treat that person as liable for the debt. But Raul’s unwillingness or inability to answer our questions satisfactorily meant we could not reach this conclusion.

We did, however, find that staff had not followed up when they said they would and had taken too long to respond to a request from Raul for access to personal information. We noted that Raul was also reluctant to engage and that the bank's service hadn't negatively impacted his ability to engage.

We found that Raul was liable for the debt created by the unarranged overdraft, but that the bank should compensate Raul $1,000 for the deficiencies in its service. The bank had already offered to write of more than $3,000 of fees associated with the debt, and this offer was still open to Raul (although he could accept only this offer or our recommendation, not both).