PMI Mortgage Center

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. Ninety per cent of us using online banking do so in order to check balances and statements, but increasingly we are also performing online transaction.

There is currently no specific legislation which protects you if a mistake is made with an online transaction – leaving you with a potential struggle to get your money back following an errant click of the mouse.

One small typo when transferring money to another bank account could land you with a serious problem. 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.

Should your hard-earned cash end up in a stranger’s bank account, it could well be gone for good. One bank worker found herself in this very position last year, when she accidentally transferred £2,000 to 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 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.

As is it wasn’t enough to have made the mistake in the first place, the Data Protection Act makes it hard for the person who made the error to get the money back, as the bank is not allowed to reveal 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. 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. Not exactly ideal when you have already lost money because of a simple mistake in the first place.

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.

Most people – you would hope – when faced with an unexpected amount of extra cash in their account, would do the right thing and give it back, yet there is no guarantee and it could represent just too tempting a bonus for someone battling to make ends meet.

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. Always check the account details you have entered at least twice, if not three times. You may want to ask someone else in the house to check with you.

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 easiest way to solve the problem is to try and let the bank know before the money has actually left your account.

4. If you have a significant amount of money to move you should perhaps consider telephone banking or banking in person, as using online banking for large amounts of money is risky. At least then you will not be at fault if the wrong details are entered and will have some comeback. If you do decide that online banking is better for you, take extra care when carrying out your transaction. Some banks will not allow you to transfer more than £10,000 in one day online anyway for security reasons.

5. Large sums of money would be better transferred as a series of smaller transaction in order to minimise losses if something does happen to 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.