Banking Online? Beware the Mouse!

Posted on March 9, 2010
Filed Under Debt | Leave a Comment

By Alison Steed
MyMoneyDiva.com

Internet banking users have reached the highest level yet in the UK, with 22m banking online to deal with their current accounts, according to data from the Payments Council, yet online bankers could be losing a staggering £439m a year in transactions that go astray because of a lack of protection.

More than half of the 41.5m internet users are now banking online as a main way of dealing with their current account. Ninety per cent of us using online banking do so in order to check balances and statements, but increasingly we are also performing online transaction.

But if something goes wrong with an online transaction, you could seriously struggle to get your money back, as currently it is one of the few areas which is not covered by any form of specific legislation to help those who make a mistake.

The problem arises if you happen to enter a digit wrong in the bank account number of the person you are looking to transfer the money to. As much as £439m could have been “lost” to Britons alone in this way, and the Financial Ombudsman cannot even be called upon to help.

There’s a good chance that your hard-earned cash will be gone for good if it lands in the account of a total stranger. An accidental transfer of £2,000 into the wrong account put one unfortunate bank worker in this very position last year.

Once the transfer has been processed to the other bank, the person who made the mistake must contact their own bank to request that the receiving bank gets in touch with their customer to ask for the return of the funds.

A bank may simply “request” that a payment made in error be refunded under current legislation. If that request is ignored or the bank refuses to act, there is nothing else that can be done by your bank.

The Data Protection Act prohibits the bank from revealing customer details, which means that it can be extremely difficult for the person who made the mistake to take legal action for the recovery of the money.

In turn this makes it impossible to chase any individual for the money as you wouldn’t know who to take court action against. Technically a judge could rule that the banks reveal those details so you could take the matter up with a person – but this would be a costly route. Obviously this is not exactly an attractive option, having already lost money from the initial mistake.

What this means is that a person on the receiving end of such a mistake could legally and legitimately ‘steal’ your money – albeit technically not actually theft – as the means by which they came about it had nothing to do with them.

While you would hope that most people would do the right thing and give that money back, there is no guarantee – and having some extra cash appear out of nowhere while many people are struggling to make ends meet, is something that is likely to be hard to pass up.

We are working on trying to build a case for the law to be changed to offer more protection to online banking users, but for now, there are five top tips on what you can do to try to protect yourself:

1. Always check the account details you have entered at least twice, if not three times. You may want to ask someone else in the house to check with you.

2. Ensure you have selected the correct name if choosing from a drop-down list – a banking favourite where mistakes can easily occur.

3. Once you realise you have made a mistake, get in touch with your bank as soon as possible – even if you have to send an email in the middle of the night. The easiest way to solve the problem is to try and let the bank know before the money has actually left your account.

4. Transferring large amounts online is a risk, so perhaps if you have to move a significant amount of money from one account to another, you should consider going into the bank or using phone banking. At least then you will not be at fault if the wrong details are entered and will have some comeback. If you do decide that online banking is better for you, take extra care when carrying out your transaction. Many banks will have a limit on how much can be transferred in one day in any case – usually this is around £10,000.

5. In order to minimise losses should something go wrong, think about transferring largers sums as a series of smaller transactions.

MyMoneyDiva.com would like to hear from anyone who has had problems along these lines. Please go to www.mymoneydiva.com/community and tell us about what happened.

Alison Steed is the editor of the personal finance website for women MyMoneyDiva.com.

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