By Alison Steed
MyMoneyDiva.com
Internet banking users have reached the highest level yet in the UK, with 22m banking online to deal with their current accounts, according to data from the Payments Council, yet online bankers could be losing a staggering £439m a year in transactions that go astray because of a lack of protection.
More than half of the 41.5m internet users are now banking online as a main way of dealing with their current account. The most common uses are to check balances and check statements – around nine in 10 of us using online banking do so for these reasons – but an increasing number of us are undertaking online transactions.
But if something goes wrong with an online transaction, you could seriously struggle to get your money back, as currently it is one of the few areas which is not covered by any form of specific legislation to help those who make a mistake.
A major problem can occur simply by typing one wrong number of the bank account to which you are transferring money. An estimated £439m of hard-earned cash could be lost to Brits who cannot even call on the Financial Ombudsman to help get the money back.
There’s a good chance that your hard-earned cash will be gone for good if it lands in the account of a total stranger. An accidental transfer of £2,000 into the wrong account put one unfortunate bank worker in this very position last year.
If a mistaken transfer is being processed already, the person who made the error must first contact their bank who can then only request that the receiving bank contacts the beneficiary of the funds to ask that they be returned.
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.
The Data Protection Act prohibits the bank from revealing customer details, which means that it can be extremely difficult for the person who made the mistake to take legal action for the recovery of the money.
This, in turn, means you would not be able to take any court action against the individual, because you do not know who you would be chasing for the money. Technically a judge could rule that the banks reveal those details so you could take the matter up with a person – but this would be a costly route. Obviously this is not exactly an attractive option, having already lost money from the initial mistake.
What this means is that a person on the receiving end of such a mistake could legally and legitimately ’steal’ your money – albeit technically not actually theft – as the means by which they came about it had nothing to do with them.
As much as you would hope that the beneficiary of an unexpected amount of cash would be decent enough to give it straight back, they are not required to do so, and could come as a pleasant surprise to someone who may be struggling to pay the monthly bills.
We are working on trying to build a case for the law to be changed to offer more protection to online banking users, but for now, there are five top tips on what you can do to try to protect yourself:
1. Be sure to check the details you have entered closely. It’s a good idea to ask a partner or housemate to check them for you as well.
2. Take extra care when selecting a recipient via a drop-down menu – this is a favourite option on online banking sites and it is not difficult to click on the wrong name.
3. If you do realise that you’ve made a mistake do not wait until the bank opens to report it – send an email in the middle of the night if necessary. The sooner you let them know, the better the chances are that the payment can be stopped before it leaves your account, and that is the easiest way of unpicking this thorny problem.
4. Consider using telephone banking or going into a branch of your bank if you have a large amount of money to transfer – using online banking for large amounts is risky. At least then you will not be at fault if the wrong details are entered and will have some comeback. If using online banking is better for you, then be extremely careful. Many banks will have a limit on how much can be transferred in one day in any case – usually this is around £10,000.
5. If transferring a large sum, think about doing this as a series of smaller amounts to protect yourself if something should go wrong.
MyMoneyDiva.com would like to hear from anyone who has had problems along these lines. Please go to www.mymoneydiva.com/community and tell us about what happened.
Alison Steed is the editor of the personal finance website for women MyMoneyDiva.com.