Bank recycled my old account number and gave to someone else!

MrCarrot
MrCarrot Posts: 252 Forumite
Part of the Furniture 100 Posts Name Dropper Combo Breaker
edited 24 September 2009 at 1:18PM in Budgeting & bank accounts
I thought I'd share with everyone a story that has recently occured to me.

My business was due to receive a VAT refund of £1000. This is the first time in 10 years we've received money back from the VAT office as opposed to giving it to them.

30 days went by and I wondered where the money was, so I called the VAT office and they said the money had been paid. They provided bank details which didn't sound right.

To cut a very long story short, they had used the bank details that we provided them with 10 years ago when we registered, and that account was closed around 5 years ago. Having never received a payment from them in the past, we totally forgot that they even held bank details from us.

Now, you would expect the money would just bounce back to the VAT office since our bank account no longer existed. However, to my horror it transpired that our old bank account number had been recycled, re-used and issued to a new customer at the same branch, using the same sort code! :eek:

Which basically meant someone else had the £1000 in their account. The VAT office said they paid the money in good faith to the details we provided (albeit 10 years ago) and it was not their problem. The bank said they had received the money in good faith and were allowed to recycle account numbers after a certain number of years. I was stuck between a rock and a hard place.

In the end I contacted our solicitor who said it would be up to us to sue the account holder for the money. First though, I would have to obtain a court order to force the bank to tell me who the account holder was since their details were protected by data protection. He suggested that before doing this, I could write a letter to the account holder asking for the money back, and forward it through the bank.

In the end I went into the bank along with a letter from the VAT office proving the money was intended for my business. I also took a copy of bank statements showing that at one point in time I was in possesion of that account number. Thank the Gods - 2 days later the bank rectified the mistake off their own back, transfered the money back to me and sent the account holder a letter saying there had been a mistake.

I count myself very, very lucky. The fact that the banks recycle account numbers and in some cases apply them to the same sort codes has been a real eye opener for me. Of course, it was my fault for not updating our bank details and I have contacted the VAT office now to do so. However my accountant says she has potentially hundreds of clients who registered for VAT 10 or 20 years ago and could fall into the same trap without realising. I imagine the same thing could happen to people who at some point receive a payment from someone who has saved their old account details.

In addition to all the above I also read many stories on the Internet about people who received unexpected money into their bank account, asking whether they had to pay it back. There were many different answers ranging from, "Yes you have to give it back" to, "No it was someone elses mistake, you can keep it." To clarify the matter, my solicitor advised the recipient of the money would have to give it back and could be sued for "unjust enrichment" otherwise. He said that if you found a bag of money or a mobile phone by the side of the road, it does not automatically make it yours just because you're in possession of it.
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Comments

  • fawinds
    fawinds Posts: 372 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    I believe besides account number, the bank should have checked the account holder name. There would clearly be a mismatch.
  • fawinds wrote: »
    I believe besides account number, the bank should have checked the account holder name. There would clearly be a mismatch.

    I have heard some conflicting things about this. Some people say that with electronic transfers, the name is not used/matched - only the sort code and account number. I am not sure if this is true or not. Certainly whenever I have made an electronic payment it asks for the benificiary's name as well as account number and sort code.
  • MrCarrot wrote: »
    [...]
    In addition to all the above I also read many stories on the Internet about people who received unexpected money into their bank account, asking whether they had to pay it back. There were many different answers ranging from, "Yes you have to give it back" to, "No it was someone elses mistake, you can keep it." To clarify the matter, my solicitor advised the recipient of the money would have to give it back and could be sued for "unjust enrichment" otherwise. He said that if you found a bag of money or a mobile phone by the side of the road, it does not automatically make it yours just because you're in possession of it.

    Your solicitor would appear to be mistaken (or at least overstating his stance): http://news.bbc.co.uk/1/hi/business/8251679.stm, and his analogy doesn't hold.
    Conjugating the verb 'to be":
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  • MrCarrot
    MrCarrot Posts: 252 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    edited 24 September 2009 at 3:06PM
    Your solicitor would appear to be mistaken (or at least overstating his stance): http://news.bbc.co.uk/1/hi/business/8251679.stm, and his analogy doesn't hold.

    I think there are many holes in that story by the BBC and lots of missing information. The person who made the mistake claims she doesn't even know which account it went into.

    Furthermore she could go to court and get an order for the bank to reveal who the account holder was, but it would appear she hasn't done this. There are a lot of theories floating around regarding this, one of which includes she knows who the money has gone to (why wouldn't you if you'd made a payment to them previously, as in her case?) and has since fallen out with them, and they won't give the money back. Certainly I think this is a case of selective journalism.

    In the past this kind of thing has happened, but with larger sums of money (i.e. millions), and the person involved has gone to prison for spending the money and not giving it back.
  • davethorp
    davethorp Posts: 1,578 Forumite
    Part of the Furniture 1,000 Posts
    I have heard similar stories before. Course it is very possible as there is only a finite number of 8 digit numbers that can be allocated as account numbers but you would expect them to allocate a recycled number to a different sort code in order to prevent this very thing
  • davethorp wrote: »
    I have heard similar stories before. Course it is very possible as there is only a finite number of 8 digit numbers that can be allocated as account numbers but you would expect them to allocate a recycled number to a different sort code in order to prevent this very thing
    opinions4u wrote: »
    There are 100 million permutations of 8 digit numbers.

    No sort code has 100 million accounts allocated to it.

    Yes exactly. Someone at the bank even said they wouldn't assign an old account number to the same sort code, but in this instance they obviously did :(
  • Extant
    Extant Posts: 2,140 Forumite
    fawinds wrote: »
    I believe besides account number, the bank should have checked the account holder name. There would clearly be a mismatch.

    Account names are used as a secondary match to help track down a mis-placed payment in the case of, for example, an invalid account number being provided.

    Matching names is not a surefire way to place credits and would become a significant problem in many cases (i.e. business names, people going by middle names, people who have names too long to fit in the field, maiden names, etc.)
    What would William Shatner do?
  • Extant
    Extant Posts: 2,140 Forumite
    opinions4u wrote: »
    There are 100 million permutations of 8 digit numbers.

    No sort code has 100 million accounts allocated to it.

    Depends on how the bank assigns bank account numbers and what checksums etc. they build in. As I'm sure you well know, banks do not tend to issue accounts in the order of 00000001, 00000002 and on. Added on top, there may be ways of identifying accounts issued based on sequence, which further reduces the number of account numbers available to issue.

    It is entirely possible to have a "full" sort code, and this story is not surprising at all.
    What would William Shatner do?
  • Extant
    Extant Posts: 2,140 Forumite
    davethorp wrote: »
    I have heard similar stories before. Course it is very possible as there is only a finite number of 8 digit numbers that can be allocated as account numbers but you would expect them to allocate a recycled number to a different sort code in order to prevent this very thing

    There is indeed a finite number of account numbers, and it's not as simple as just putting it on a different sort code. Account numbers don't follow in sequence, and usually include a checksum or other form of validation to make sure it is a valid account number at a certain sort code. These are normally called "books," from a time gone by where a printed book featured all available account numbers at a sort code, and whether they had been issued, last used, etc.

    For example,

    20-00-00 38020000 is a valid Barclays account.
    20-71-04 38020000 is a valid Barclays account too, because 20-71-04 uses the same book as 20-00-00.
    20-71-03 38020000 is not valid because it uses a different book.

    (You can test this for yourself here.)

    You would expect a certain time period to elapse before an account number is reused, which no doubt has elapsed over the course of five years. That seems a perfectly fair and prudent time to wait, to be honest - you would think this would be sufficient time to update your details... ;)
    What would William Shatner do?
  • Well, you don't have to look far, to see whose account your money went into:

    http://forums.moneysavingexpert.com/showthread.html?t=1967533
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