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.
One small typo when transferring money to another bank account could land you with a serious problem. As much as £439m could have been "lost" to Britons alone in this way, and the Financial Ombudsman cannot even be called upon to help.
Should your hard-earned cash end up in a stranger's bank account, it could well be gone for good. Last year a bank worker found herself in this very position after accidentally transferring £2,000 into the wrong bank account.
Once the transfer has been processed to the other bank, the person who made the mistake must contact their own bank to request that the receiving bank gets in touch with their customer to ask for the return of the funds.
But the current law only allows the bank to "request" that a mistaken transfer be refunded. If that request is ignored or the bank refuses to act, there is nothing else that can be done by your bank.
To add insult to injury, it’s very difficult for the person who made the errant transaction to take legal action against the receiving account holder to recover the money, as the Data Protection Act prohibits the bank from revealing customer details.
In turn this makes it impossible to chase any individual for the money as you wouldn't know who to take court action against. Legally you could ask a judge to rule that the banks give up personal details so that you could take action against an individual, but this would cost you more money. 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. Take a few extra moments to check again that the details you have entered are correct. You may want to ask someone else in the house to check with you.
2. Ensure you have selected the correct name if choosing from a drop-down list - a banking favourite where mistakes can easily occur.
3. Do not hesitate to contact the bank - even if this means sending an email in the middle of the night - the moment you realise a mistake has been made. If you let the bank know quickly enough they may be able to stop the payment from leaving your account.
4. Transferring large amounts online is a risk, so perhaps if you have to move a significant amount of money from one account to another, you should consider going into the bank or using phone banking. That way, if the bank teller puts the wrong account details in, you have some comeback. If using online banking is better for you, then be extremely careful. Some banks will not allow you to transfer more than £10,000 in one day online anyway for security reasons.
5. In order to minimise losses should something go wrong, think about transferring largers sums as a series of smaller transactions.
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.
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