Payee Agrees to refund of Faster Payment but Bank keeps money

colsten

101problems wrote: »

You say you are down £150 I disagree you have paid your friend,

The OP didn't say the money went to a friend - they just said it went to the wrong person. It could have been a friend, but equally it could have been to somebody who was meant to, and failed to, provide some goods to the value of £150.

The OP probably has to take the recipient's word on trust, and most likely doesn't have any further information about the recipient's bank account, and why he is allegedly in the process of closing it, with no means of making any payments from the account being closed or from any other account. The bank will know a lot more, including previous payments made by the OP to the recipient.

I think the OP has a case against the recipient, not the recipient's bank. If the recipient doesn't pay, the OP could take him to the Small Claims Court though this might be a waste of money and time if the recipient has no money.

eskbanker

But as per the new code of conduct, my understanding is that if the sending bank contacts the receiving bank to inform of a misdirected payment, the receiving bank will then contact the account holder, who will then in this case consent to the money being returned. At that point, given that the transaction has been agreed by all to have been misdirected, is the receiving bank in a position to refuse its reversal?

Archi_Bald

If the receiving bank would have to pay it out of their own money, which seems to be the case in this thread, they probably have a right to refuse. It is no different to refusing an unarranged overdraft, or refusing the request for an overdraft.

If there is enough in the account the money has been sent to, they do not have the right to refuse. My opinion, anyway.

Do you happen to have a link to the new code of conduct? Perhaps that will have the official answer.

Archi_Bald

As an example of T&Cs applicable to mistaken payments, from the HSBC current account T&Cs (with my highlighting):

26.7.4. If a payment is fraudulently or mistakenly paid into your account, the amount of the payment may subsequently be deducted. This may happen even if the funds are included in the balance of your account, you have used them to make a payment, have transferred or withdrawn all or part of them. If the deduction of the payment from your account would either make your account go overdrawn or go over an existing overdraft limit, we will treat this as an informal request for an overdraft – please see clause 3.3 of the Current Accounts Terms for further details.

If you read through the OD section, as expected it says they can decline the request.

I would think the T&Cs of other banks are basically the same. If the OP provides the name of the bank, someone can help finding the appropriate T&Cs.

colsten

eskbanker wrote: »

But as per the new code of conduct, my understanding is that if the sending bank contacts the receiving bank to inform of a misdirected payment, the receiving bank will then contact the account holder, who will then in this case consent to the money being returned. At that point, given that the transaction has been agreed by all to have been misdirected, is the receiving bank in a position to refuse its reversal?

If a receiving bank was not in a position to refuse, it could be fraudsters' paradise. Fraudster A opens lots of current accounts and just puts £1 into each. Fraudster B transfers a large amount of money to all of A's accounts. A withdraws the money or sends it elsewhere. B requests their bank to recall the payments as they were made in error. A confirms he is happy with the reversal, and his bank would be forced to return the money. B withdraws the money, A&B retire into the sunshine and A's bank would be left with a big loss.

This is perhaps a bit of an extreme example but even on a smaller scale it would be open to fraudsters unless the receiving bank can refuse.

Money-Saving-King

Majestic12 wrote: »

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.

I always do the £1 test and have been fine. If like me double and triple checking isn't enough, I want to see a test payment has gone exactly where I want it to before I send a larger amount.

Gerard_I

Archi_Bald wrote: »

Do you happen to have a link to the new code of conduct? Perhaps that will have the official answer.

Yes - kindly provided by eskbanker in an earlier post (dated yesterday at 5:45pm) - I tried to re-post it in this reply but got a message saying that because I'm a new user here I'm not allowed to post links

The site is useful and informative - but does not (or at least I haven't found) any guidelines or recommendations in regard to payments made in error to accounts that are overdrawn.

Archi_Bald wrote: »

26.7.4. If a payment is fraudulently or mistakenly paid into your account, the amount of the payment may subsequently be deducted. This may happen even if the funds are included in the balance of your account, you have used them to make a payment, have transferred or withdrawn all or part of them.

Thanks Archi Bald - for useful info - in my case the receiving bank is the Co-operative, I haven't yet been able to trace their documentation but as you say they're probably all similar.

I'm struck by the fact that it says 'If a payment is fraudulently or mistakenly paid into your account, the amount of the payment may subsequently be deducted. This may happen even if the funds are included in the balance of your account, you have used them to make a payment, have transferred or withdrawn all or part of them'

It seems to me that in my case the Co-op appears to allow themselves to carry out an action that they would not accept if a customer did the same thing - in the sense that had the receiving account holder withdrawn the money to pay a debt to another party then (had the account been in credit) then the money would have been returned to already (see below) but because the bank themselves stepped in (as it were) and in effect paid it to themselves, they have effectively made this impossible to do. They then stand back unconcerned and take the stand 'it's nothing to do with us'.

I have today received from the account holder of the receiving account copies of correspondence he has had with the Co-op.

The first is a letter from the Co-op to him saying that they have received a request from my bank for the return of a payment made in error to his account and did he object to a return of the funds (£150).

The second is a copy of his reply to them saying that he has no claim on the money and that he agrees to it being returned,

The third (dated 21st August) is a reply from the Co-op saying that as his account is overdrawn they would not be making the refund.

I have a letter from my own bank (dated 11th Aug) saying that they have actioned a request for return of the money and that the Co-op has 20 days to respond, after which they will contact me again. They have not yet done so, but in the light of the above it looks as if when they do it will to inform that the request has been denied. Whether or not they will give me a reason (or if indeed the Co-op will give my bank one) remains to be seen.

In my search for background information on this issue I have read in various newspaper 'money' columns that 'there are well-defined rules such that no-one (be they an individual or an organisation) should be in a position to benefit from a payment made in error' - although in no case was it backed up with a source or other reference as to where one can find these 'rules', unfortunately.

In this case it seems to me that the Co-op are benefiting from an error.

The receiving account holder has no benefit - he owed £302 to the Co-op before my erroneous payment into his account, he still owes £302 only now he owes £150 to me and £152 to the Co-op - he doesn't deny that he owes me the money - but he is having considerable financial difficulties at present and cannot pay me - and has no idea when he might be in a position to do so.

I certainly have gained no benefit, as is obvious.

But the Co-op has gained a benefit, they were owed £302, now they are only owed £152 - but they reduced this not by taking money which belonged to the person who owed them the money - but from me, as the result of an error. Hence my analogy in an earlier post to 'theft by finding'.

Does someone who has a greater knowledge of the facts of these matters than I do have any insights into how this argument stands up in the 'cold light of day'?

colsten

Making a test payment is a good idea for new payees. Once you got someone in your payee list, you can still end up sending money to the wrong recipient...I should know, I managed to do it once myself:o. Luckily in my case the recipient had a big enough balance, as well as internet access to their account, to return the money within minutes of me asking.

eskbanker

Archi_Bald wrote: »

If the receiving bank would have to pay it out of their own money, which seems to be the case in this thread, they probably have a right to refuse. It is no different to refusing an unarranged overdraft, or refusing the request for an overdraft.

If there is enough in the account the money has been sent to, they do not have the right to refuse. My opinion, anyway.

Do you happen to have a link to the new code of conduct? Perhaps that will have the official answer.

colsten wrote: »

If a receiving bank was not in a position to refuse, it could be fraudsters' paradise. Fraudster A opens lots of current accounts and just puts £1 into each. Fraudster B transfers a large amount of money to all of A's accounts. A withdraws the money or sends it elsewhere. B requests their bank to recall the payments as they were made in error. A confirms he is happy with the reversal, and his bank would be forced to return the money. B withdraws the money, A&B retire into the sunshine and A's bank would be left with a big loss.

This is perhaps a bit of an extreme example but even on a smaller scale it would be open to fraudsters unless the receiving bank can refuse.

To a certain extent we're all just speculating but to my mind both of the above posts would have more direct relevance in circumstances where the recipient had withdrawn the misdirected funds and the receiving bank would therefore effectively be paying out twice if complying with a reversal request, so I agree they should be able to refuse in that scenario.

However, if in this particular case the reversal would simply return the recipient's account back to the position it was in before the misdirected payment went in, that would seem to me to be a slightly different situation from those envisaged in the above posts.

Gerard_I

@colsten - agreed - I too use the 'test payment' method - usually works ok - although I have found some £1 transfers have been bounced back, as someone above said. It may depend on the receiving bank - as far as I recall Santander seem to do it - but all others I've tried have been OK.

In my case it was an existing payee, but one I had only ever paid once before, and that some time ago - I have since deleted him from my list! The problem in my case arose from a number of contributing factors - the only machine available to me at the time was an old sluggish one, on a very sluggish network connection, compounded by the fact that I had two payees in my list with almost identical names, plus my bank's internet banking user interface lists the payees in a field too narrow to show all of the name without scrolling within the field if it's a long name , and which cannot be re-sized, plus being in a hurry at the time - what one might call a 'cascade failure'.
I have since been through my list of payees ensuring that clearly identifiable data is at the left hand side of the field in every case, and therefore always clearly visible.

Having friends with positive balances is definitely where it's at!