CHAPS guarantee not worth the paper it's written on

skiandsail

My wife and I agreed to sell our share of a property in Spain to our in-laws for 70k. The conveyance was to be undertaken in Spain via the Power of Attorney protocol using a single solicitor. In simple terms our in-laws were to pay the 70k into our account in the UK via CHAPS and once I confirmed receipt of funds the transfer would take place.

On the day in question the in-laws attended their bank in person (Bank A) and made the payment e mailing me a copy of the transaction. The money did not arrive in my account causing the conveyance in Spain to fail. There was then many telephone calls and mails sent and even accusations of impropriety even though I sent evidence in the form of screenshots proving the money had not arrived in my account.

My in laws then “opened up a fraud case” via their bank that froze my account – a current account, also used in part for my consultancy business with 22k already in it. Whilst they informed me they intended to open a fraud case they didn’t tell me why and that this would freeze my account. I only found out 3 days later when trying to pay for lunch with a client when my card was refused. I rang my bank only to be informed a fraud investigation was underway owing to Bank A putting a red flag on the system. They also refused to discuss any aspect of the “case” stating they were prevented from doing so by law. They said they had up to 10 working days to investigate and during that time I couldn’t access my account and my Standing Order/Direct Debits would bounce. I had no access to my funds.

Subsequently it turned out the transaction was corrupted by an erroneous digit being entered by my in-laws bank causing the money to be placed in a holding account at my bank (Bank .

Whilst this was happening unbeknown to me, my in laws attended their bank and refused to leave until the funds were transferred back into their account and incredibly they managed to do this but I can’t find out how. This shouldn’t be allowed to happen for reasons that are obvious, I feel its totally unethical, in my opinion there was no need to open a fraud case. Interestingly the Bank of England who I think operate or oversee the CHAPS system state on their website, CHAPS payments are irrecoverable between participants (Banks). It appears the CHAPS guarantee can be overridden. I have it on good authority that all that needed to happen was a trace be put on the payment and once it was found the money should have been allocated to my account as was originally intended. It would appear my in-laws flew into an absolute panic when their funds went missing temporarily and didn’t care who they inconvenienced as long as they got their money back. It also appears their bank aided and abetted them in doing so.

Of course I wrote official complaints to both banks. Bank A flatly refuse to engage with me, as I am not their customer citing data protection (GDPR) legislation (they can’t talk about their clients or their account). That's so convenient. My bank are blaming bank A stating that they shouldn’t have “claimed” the funds back and have also intimated that a fraud investigation was not necessary and excessive given the circumstances.

They won’t discuss how Bank A was able to get the funds back - (my funds) from my bank. I think my bank were involved I very much doubt Bank A could have done this without my banks co-operation? – but I don’t understand the banking system and someone out there no doubt will.

Of course I have yet to complain to the FSO and I am also considering bringing a case for damages in the courts as I feel both Banks may have breached rules laid down by the FCA (Banking Code of Business Sourcebook, Schedule 5) allowing legal action to be taken under section 150 of the Financial Services and Markets Act , then there is the action taken by my in-laws to consider as they instigated the fraud investigation when all that happened was a payment had got stuck in the system?

I plan to see a solicitor – before I do has anyone any advice, recommendations or had a similar experience?

 

What a mess – any advice would be greatly appreciated.

[Deleted User]

It's not 'convenient' that Bank A won't talk to you - it would be a breach of the DPA.

The banks have done nothing wrong. The problem lies entirely with your in-laws. But do you really want to take your in-laws to court - and what would your case against them be? From a legal standpoint, they sent some money then regretted it and tried to get it back. 

Don't waste money on a solicitor with this one. 

ItsComingRome

Deleted_User said:

It's not 'convenient' that Bank A won't talk to you - it would be a breach of the DPA.

The banks have done nothing wrong. The problem lies entirely with your in-laws. But do you really want to take your in-laws to court - and what would your case against them be? From a legal standpoint, they sent some money then regretted it and tried to get it back. 

Don't waste money on a solicitor with this one. 

Agree completely with this.  OP, your ire should be directed at your in-laws who have completely overreacted and caused you no end of problems as a result.

I would also argue that the CHAPS guarantee is only applicable in the case of a successful transaction (i.e. the funds find their way to the correct account(and by correct I mean an account that they requested it be sent to and one that also exists.))  I can only imagine how royally peed off someone would be if they sent £70k to a non-existent account and the bank just trousered it.

https://help.bankline.rbs.com/help/payments/Payment_Recovery for example would suggest that attempts can be made to recover CHAPS payments.

Daliah

skiandsail said:

..... my account – a current account, also used in part for my consultancy business with 22k already in it.

If the current account is a personal account, you are in breach of the T&Cs if you also use it for business purposes.

Thrugelmir

skiandsail said:

Subsequently it turned out the transaction was corrupted by an erroneous digit being entered by my in-laws bank causing the money to be placed in a holding account at my bank (Bank .

Did the inlaws provide the incorrect information to their bank when requesting the CHAPS ? 

molerat

True the funds would not be recoverable from the intended recipient but that is not what happened - the funds went to a suspense account as the recipient could not be identified so were returned after the banks ascertained they had not gone where intended.

Someone, either your in laws or their bank, input an incorrect detail into the transaction then panicked and called fraud giving the correct information as the fraudulent account.

Your bank then investigated this fraud complaint in accordance with the current regulatory framework.

I can see the only wrongdoing here is from the in laws or their bank.

The problems have been amplified by you using one account for personal and business purposes.

[Deleted User]

All sounds very strange relationship with 'family' but sounds like they thought it was fraud (by a third party) rather than you committing the fraud.  Ironically, had they used either of the free methods (Faster Payment or Cheque) then this issue wouldn't have occurred. 

You are almost certainly in breach of the account T&Cs by using the account for business purposes - which will likely come out in any complaint investigation.

I would draw a line under the issue and move on. 

Ergates

 I am also considering bringing a case for damages in the courts as I feel both Banks may have breached rules laid down by the FCA

Which rules in particular do you think the banks have breached?

phillw

skiandsail said:

Subsequently it turned out the transaction was corrupted by an erroneous digit being entered by my in-laws bank causing the money to be placed in a holding account at my bank (Bank .

Whilst this was happening unbeknown to me, my in laws attended their bank and refused to leave until the funds were transferred back into their account and incredibly they managed to do this but I can’t find out how. This shouldn’t be allowed to happen for reasons that are obvious, I feel its totally unethical, in my opinion there was no need to open a fraud case.

It is weird that they opened a fraud case, what is even weirder is that when the fraud case was raised they didn't immediately notice that the money had been sent to a different account.

The transaction wasn't corrupted, it failed. It's not "your bank", you are one of their many customers. You don't get to call dibs on money in holding accounts.

As for advice, think carefully before suing in-laws. 

Sensory

To be blunt, your in-laws were utterly foolish to not double and triple-check their input details for such a large transaction. There was most definitely a further failing from either your in-laws or the bank(s) for not verifying that the inputted details were accurate after the money failed to appear in your account, before launching a needless fraud investigation causing your account to be frozen.

If you're going to complain, this should be the crux. Through the negligence of others and no fault of your own, your account was frozen by an unnecessary fraud investigation, and due to the nature of fraud investigations, you had no recourse during the fact. That your in-laws managed to claim back the money is of little consequence to you, because the transaction to you never even took place. If you sent money to the wrong account by mistake, wouldn't you want to be able to recover your money?

That you're using a personal current account for business purposes is an entirely separate issue and irrelevant to the above, and some institutions allow this anyway depending on the circumstances (you haven't provided them and there is no need to).

phillw said:

It's not "your bank", you are one of their many customers. You don't get to call dibs on money in holding accounts.

It's just easier to write "my bank", "your bank" and "their bank", as others have done. We understand the meaning conveyed in this context.

Ergates

I'm thinking that the OP didn't have a very good relationship with the in-laws to start with - they clearly didn't trust him as their first reaction on being told the money hadn't arrived was "Our son-in-law is trying to rob us".  I'm also thinking the relationship has probably completely broken down at this point.

I don't think a complaint to the OPs own bank will get anywhere.  Yes, the fraud investigation was obviously unnecessary - but the OPs bank couldn't have known that.  They would have had a request from the in-laws bank through official channels, and have to treat such things as real.  Making a complaint to the In-laws bank probably won't go anywhere either as the OP isn't a customer there.