Online banking users urged to take care

It’s a simple case of Mouse to Mayhem when the growing trend to shift money online has led to the next generation of theft that could cost 20 million online banking users a staggering £439m, and not even the Ombudsman can help get it back.

MyMoneyDiva.com, the financial information site for women, has identified a loophole in e-banking law which means money transferred to the wrong account in error may be lost forever. We can all claim ‘dizzy’ moments; but if that temporary trance causes you to enter a single digit incorrectly, you may be losing your hard earned cash to a stranger and never see it again.

A bank worker found herself in this very situation not too long ago. Clare Logie accidentally transferred £2,000 into the wrong account; and as the recipient refuses to let go of the cash, she is unlikely to ever see the money again. Clare said: “I feel sick to have lost so much money. With the concern about jobs at the moment, no one wants to lose cash, and so this couldn’t have come at a worse time. I have been battling with the bank for four months now and have yet to see a penny. The one thing I find so hard to believe is how dishonest the recipient is – and that there is nothing the banks can do about it.”

Once the transfer has been processed to the other bank, the individual 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.

But under the current legislation, the only thing the bank can do is ‘request’ permission to retrieve the mistaken payment from its customer’s account. If that permission is denied, or the request is ignored, there is nothing else the bank can do.

To add insult to injury, it’s very difficult for the person who made the errant transaction to take legal action against the receiving account holder to recover the money, as the Data Protection Act prohibits the bank from revealing customer details.

Alison Steed, editor and co-founder of the personal finance website MyMoneyDiva.com, said: “It is outrageous. For all intents and purposes, the person who has chosen to hang onto your money is being helped by the legal system as it stands.

“Technically, it is not theft if the money has been transferred to their account in error; but that doesn’t prevent the person who made the mistake from suffering the emotional turmoil that comes with losing any amount of money suddenly and unexpectedly. Of course it’s morally wrong, and many people in the same situation would have happily passed it back. But in such strained financial times, the temptation to think of money magically landing in your account as ‘good fortune’ is likely to be harder to pass up. So many wouldn’t be as honest as you’d like to expect.

“We want to see a change in the arbitration process – and/or the law – to help protect consumers who find themselves in this unfortunate situation because of a slip of the mouse.”

The banks argue that their account numbers are designed with ‘check digits’ to minimise the occurrence of such errors, but with 146 million transactions made online and by phone last year, at an average value of £570, if even one per cent of these online transactions went astray, it would amount to £439m. It is shocking to realize how much money could be lost.

Alison Steed continued: “We want to get an idea of just how big a problem this is. Anecdotally we have already come across a fair number of people who have faced this issue. Ideally, we want to gather evidence so that we can change the rules and finally plug this loophole in consumer protection.”

MyMoneyDiva.com offers five top tips when banking online:

1. Double checking the account details you input.

2. Be wary of choosing your recipient by a drop-down list - very easy to select the wrong name.

3. If you realise you have made a mistake, then contact your bank as soon as you can, even if this is by sending them an email in the middle of the night. The sooner you let them know, the better the chances are that the payment can be stopped before it leaves 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. That way, if the bank teller puts the wrong account details in, you have some comeback.

If using online banking is better for you, then be extremely careful. Some banks will not allow you to transfer more than £10,000 in one day online anyway for security reasons.

5. For larger sums, consider doing a series of smaller transactions to avoid losing a lot of money if something does go wrong.

MyMoneyDiva.com would like to hear from anyone who has had problems along these lines. Visit mymoneydiva.com/forum and tell them about what happened.