better banking

Mistaken payments

04 Dec 2014

With so many payments made every day in the New Zealand banking system, it is easy to make mistakes.

You can make mistakes when making payments in a number of ways. For example, you could fill in the wrong account number on a manual deposit slip, or when using internet banking. When this happens, your money can end up in someone else’s account.

You need to take real care when giving, writing or entering account numbers. Transactions are processed by account number, so this is the crucial piece of information to get right. Although banks will often ask for an account name as well as an account number, their systems do not check they match. 


What can I do if I’ve made a payment to the wrong account?

If you’ve made a payment in error, you should contact your bank as soon as possible. The sooner you contact your bank, the better chance your money can be recovered. If the payment has been made to an invalid account, it will usually “bounce” back into your account.

It can be more difficult to retrieve a mistaken payment if it has gone into a valid account. As a general rule, banks can only reverse payments that customers have made in error with the consent of the account holder who received your payment. If you report a mistaken payment, your bank and the recipient’s bank must co-operate with you to try and recover the payment. This usually involves the recipient’s bank contacting the account holder to ask their permission to reverse the transaction.

If the recipient of your payment refuses to return the money, you will need to resolve the issue directly with them. This might involve taking the matter to court, although there may be privacy issues in getting the recipient’s contact details. If you are faced with this situation and your bank has done all it can to assist you, we recommend you seek legal advice.


What are my rights if I have received a payment that I wasn’t meant to?

If you receive a payment into your account that you were not expecting, you should contact your bank as soon as possible to let them know.

If your bank contacts you asking for your consent to reverse a payment you have received in error, you should let the money be returned to its rightful owner.

If you have already spent the money, you will need to repay it unless all of the following circumstances apply:

  1. You received the payment in good faith.  In other words, you reasonably believed the money was owed to you.
  2. You altered your position reasonably and in reliance on receiving that payment. This means you used the money believing reasonably that the money was owed to you and that you didn’t act fraudulently or recklessly.
  3. It would be inequitable to require you to repay it. This looks at whether it’s fair for you to have to repay the money given your particular situation and the circumstances of the payment.


What can I do if someone accidentally paid a third party instead of me?

If you have not received a payment you were expecting, you should contact the payer for information. If the payer has accidentally paid someone else instead of you, they can attempt to retrieve the payment through their bank.

The payer’s bank owes a duty of confidence to its customer which means it will not be able to reveal information to you about the payer’s bank account, or about the person who received the funds.


Case note

An incorporated company – “A” Inc - purchased an online business banking system from a bank to manage its accounts. The company chose this product after the bank advised it was a more secure option than ordinary internet banking.

 “A” Inc subsequently made an online payment through internet banking.  However the staff member accidentally entered the wrong number and the funds went into the account of another customer (Mr B).  “A” Inc contacted its bank which requested the funds be returned from Mr B’s bank.  But Mr B refused to return the funds mistakenly paid to him.

“A” Inc believed its bank should have warned them the payment system “wasn’t fool proof” (sic) and that special care was needed when entering bank account numbers.

Although the bank was sympathetic to “A” Inc’s situation, it maintained it was not responsible for the error, as under the system’s terms and conditions, customers were responsible for any loss caused by errors on their part when entering account information. The bank said “A” Inc had accepted these terms and conditions when it completed the standard application form. Nevertheless, the bank offered “A” Inc a goodwill payment of $500.

Initially “A” Inc did not accept the bank’s offer, and complained to our office.

We agreed the customer is responsible for entering the correct information when making an internet banking transfer.  There was no need for a special warning, as it should be clear to anyone that there will be a problem if the information entered is not accurate.  Had the same mistake been made during an “over-the-counter” transaction, the outcome would have been the same.

“A” Inc accepted our view, and accepted the bank’s offer of $500.


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