Payee Agrees to refund of Faster Payment but Bank keeps money

Gerard_I

I recently made an error with a Faster Payment and payed the wrong person. On realising this I contacted the holder of the account I had credited in error who had no problem in agreeing that the money should be returned to me but said that he was in the process of closing the account, and no longer had a cheque book for the account or any other means of initiating the return of the money himself - but that he would contact his bank and tell them that the money was not his and was paid to his account in error and should be returned to me.

I also contacted my own bank and advised them of the situation and they told me that they would initiate a claim for the money to be returned and so long as the account owner agreed that it was not theirs to keep, this should proceed in due course.

I have had a letter from my own bank saying that the request has been made and that they will contact me in due course with the outcome.

However, today the account holder who received that payment has contacted me and said that he has received a reply to his letter to his bank in which he advised them that the money was paid into his account in error and should be returned.

In this letter, his bank has said that they will not be returning the money to me as he has a £300 overdraft on the account - so they will be keeping the £150 that I deposited in error, in order to reduce the money he owes to them by that amount.

In effect they are taking my money in order to recoup a debt owed to them by their own customer, a debt for which I have no liability whatsoever!

Obviously I am not at all happy about this - the account holder has told on that on receipt of this letter he called his bank and again insisted that it was not his money and that it should be returned to me - but they refused to discuss the matter further with him.

Can anyone give me any advice as to what claim I have in regard to this matter and the fact that my money is in effect being requisitioned by this bank in order to recoup a debt for which I am in no way responsible?

pmduk

You have a claim against the recipient. His arrangement with his own bank are not your concern. In practical terms it's difficult to see the way ahead, you could sue, but if he hasn't the money, you're wasting more cash.

He's £300 up, he has your £150, and now owes the bank £150 less than before. But if he couldn't pay them how is he going to pay you?

He wouldn't have been able to close his account with an outstanding debt, so either he had the money to pay them or is giving you a bs story. And I know which I believe

Hopefully, someone else will be able to give you better advice, at the back of my mind I believe there.has been an FOS ruling on a similar case, it may be worth searching the FOS rulings.

Gerard_I

Hi pmduk, and many thanks for your reply.

I am searching through the FOS decisions online - as you no doubt know there are many many of them - so if anything further occurs to you later that would help narrow the search I'd be very grateful if you'd post it here.

To add some additional detail/clarification re: the case

I have seen a copy of the letter that the recipient account holder sent to his bank stating that this money was credited to his account in error and that it does not belong to him, and the reply sent to him by his bank which takes no account of this fact and simply states that the money will be kept by the bank in order to reduce his debt to them.

He has offered to repay me himself - but he is in considerable financial difficulties at present and so this will not be able to happen for some considerable time. He is and has for some time been in negotiation with the bank in order to repay his overdraft and close the account, assisted by one of the debt management charities - so his bank knows he is himself working to sort out his problems with them.

I accept that I have no claim against my bank as it was my mistake, but it is my contention that as the money was paid to this particular account in error and the account holder has freely and fully admitted to his own bank that he has no entitlement to the money, Therefore, I do not consider it fair that his bank steps in and claims the money in settlement of of his debt to them, when he has freely admitted both to me and to his bank that he is not and never was entitled to the money in the first place.

To my mind it is analogous to my accidentally dropping £150 in cash in one of that banks branches, and a member of staff finding it and using the money to reduce the banks debts by £150. Then telling me that yes they found it, but I can't have it back because they are using it for their own purposes, which would be theft by finding.

eskbanker

Gerard_I wrote: »

I recently made an error with a Faster Payment and payed the wrong person. On realising this I contacted the holder of the account I had credited in error....

This implies to me that the recipient is known to you (banks wouldn't normally release contact details) rather than the usual scenario of an account number typo resulting in a payment going to a completely unknown destination - I don't know if this does actually make a difference but would have thought that this makes it a discussion between two people rather than two banks?

Gerard_I

Dear eskbanker,

thanks for your reply. If you read a bit more of my post you'll see why and how the bank (primarily the receiving bank) is in fact the cause of the problem. The account holder (who is indeed known to me) wants the money returned to me and has written to his bank instructing them to do so - it is his bank who has claimed the money as their own and is refusing to action the request

eskbanker

Yes, I did read the rest of the posts, I was just speculating that the direct contact between the two of you may have influenced the receiving bank's position, especially in the light of the debt negotiations with the recipient. Not saying that's right by the way but anyway, now that you've invoked the recovery procedure via your bank, the receiving bank may react differently, especially if they're subscribers to the code of conduct published earlier this year, see http://www.paymentscouncil.org.uk/current_projects/misdirected_payments/ for further details....

colsten

Gerard_I wrote: »

the bank (primarily the receiving bank) is in fact the cause of the problem.

errrm, no they aren't - the cause of the problem is that you sent money to the recipient's account. It doesn't matter that you say you did this by accident - you sent the money.It is most definitely not a problem your bank has caused, and it is also not the receiving bank's fault that you sent the money to the recipient.

I think the recipient's bank would probably have the law and the FOS on their side. In the end, it is the recipient who owes you money. not his bank. You are now just another creditor to the recipient, and you are in the queue behind the bank, at least. The recipient owed money to the bank before they owed money to you.

Gerard_I

Hi again eskbanker,

thanks for coming back - and for the link, much appreciated.There's some useful info there - both the banks involved in my case are subscribers to the scheme according to the list on that site.

Hoipe you're right and the recall will have more success than the account holder did, the twenty days that the letter from my bank says that the receiving bank has to reply will be up in a couple of days. could be a bad sign.

Hello colsten,
I do know that I have no claim against my bank - and have said so elsewhere here. When I said
'the bank (primarily the receiving bank) is in fact the cause of the problem.'
I didn't intend to imply that my error was not the root of the whole issue, it clearly was, the 'problem' I was referring to was the one of having the erroneous payment returned, I meant it was the bank that was stopping this happening, not the account holder. In all the cases I have found while searching for information on this issue the only occasions when a payment made in error was not returned is when the receiving account holder objected, I have so far found no cases that match my situation to shed any light on the pros and cons of the matter.

Your rather pessimistic view might well turn out to be true, I'm sure you won't mind if I say that I hope it doesn't

Gaffy

This is the exact reason why everyone should always send a test payment of £1 first when setting up a new payment.

Majestic12

Gaffy wrote: »

This is the exact reason why everyone should always send a test payment of £1 first when setting up a new payment.

A frequent method used by fraudsters, which could result in the payment being held up.

The best advice is to double and triple check the bank details of the account you are sending the payment to. It's not rocket science.

101problems

You say you are down £150 I disagree you have paid your friend,
When you say you paid the wrong person was it the right person but to the wrong account?
These details are massively important to any claim, if it as I have mentioned you have paid your £150 to your friend the fact they cannot access the funds is of their own doing, if the friend was to take you to small claims you can prove you paid them!
If it was sent to the wrong person keep on fighting as eventually you will be successful I have also seen a FOS ruling on that basis that as the recipient had no legal claim to the funds the bank had no right to set it aside in lieu of arrears.
I wish you good luck