Many of us are used to seeing less money than expected when we check our bank balance but what happens when there are significantly more funds than you are expecting to see because a payment has been made by mistake?
A shocking clerical error at Northern Powergrid made the news this week, as several customers were accidentally sent cheques for trillions of pounds as compensation for the power outage caused by Storm Arwen last November. William Watkins, associate solicitor in our Dispute Resolution team, investigates your legal rights and obligations if you ever find yourself on the receiving end of an accidental windfall.
Why do accidental payments happen?
Receiving an unexpected cheque or deposit into your bank account can happen for all sorts of reasons, from a banking error to an overpayment from your employer, but while it may sound like a dream come true, the reality can be quite different. Clearly, the sums involved in the Northern Power compensation story were so high that no customer will have thought they could keep it. However, many of us will have experienced an unexpected payment at some point in our lives and will have been less clear on our rights.
What to do if you receive an accidental windfall
Whether they like to admit it or not, the first question most people would ask themselves in a situation like this is likely to be ‘Can I keep the cash?’ but unfortunately, the answer is no.
Legally, if a sum of money is accidentally paid into your bank or savings account and you know that it doesn’t belong to you, you must pay it back.
If you keep any money that is wrongly credited to your account and don’t take steps to cancel it, you could end up being charged with ‘retaining wrongful credit’ under the Theft Act 1968. Civil action in the County Court can also be taken against you if you refuse to return the funds.
No matter how tempting it is to say nothing and see if the mistake gets noticed, you should always inform your bank immediately. Even if the money is from your employer or from the taxman, you still need to let your bank know as you could get into trouble for just leaving the money in your account if you know it should not be there. Instead, you are expected to take reasonable steps to cancel the transfer or return it to the sender.
What if you have already spent the money before you notice the error?
People often think that if the cash is gone, they won’t have to pay it back but this is not the case. If you spend any money knowing it is not yours, you face a maximum sentence of ten years in prison and may have to pay a hefty fine.
Pleading ignorance is very unlikely to work in your favour and could bring a criminal charge so is never worth the risk.
Once you have alerted the bank, where should you keep the money?
Many High Street banks have processes in place to arrange for the swift recovery and the return of accidental or mistaken payments when they have been notified. However, if some time passes and the bank has still not taken action, and you are worried about spending the money, it might make sense to move it into an easy access savings account that is linked to your bank account, to help make sure you do not eat into it accidentally while the error is rectified.
You should ensure that it is an account that you can remove the money from at any time so that when you’re asked to pay it back, you can do it immediately. You might also get to keep any interest that was earned in that time.
Are there any exceptional circ*mstances where you can keep the money?
There have been some, very rare examples where individuals have been allowed to keep money that has been accidentally paid to them but these are very few and far between. You would need to be able to argue that you were expecting a similar sum and thought that was what you received or that you did not realise that you were given the money in error.
Winning cases like these is extremely rare so it is never worth taking the risk of keeping quiet and not telling your bank about the mistake.
Honesty is always the best policy
Even if nobody contacts you immediately, do not be tempted to spend your windfall. Banks regularly carry out audits which means they will always catch up with you.
Honesty is always the best policy and, by informing your bank or employer promptly, you could even find yourself on the receiving end of a reward. There are plenty of examples where people have been allowed to keep some of their overpayments by being honest and upfront.
Even if there’s no reward, being honest and giving the money back is better than the potential punishment you could face for being caught spending cash that’s not legally yours.
If you are involved in any type of legal dispute and want professional advice, get in touch with the Dispute Resolution team at Harding Evans Solicitors on 01633 244233.
FAQs
If you notice a bank error in your favor, you should report it to your bank as soon as possible. You cannot keep money that was mistakenly deposited into your account; it must be returned. Failing to report and return the money could result in legal consequences, such as criminal charges.
Can I keep money accidentally paid into my account? ›
The money isn't legally yours - so you'll need to pay it back. Otherwise, you could end up being charged with 'dishonestly retaining a wrongful credit' under the Theft Act 1968 and civil action can be taken against you in county court.
What if money unexpectedly shows up in my account? ›
In which case, talk to your bank about what to do - especially if the return of the money will cause financial difficulty. "You shouldn't spend the money, as it is likely the person who mistakenly sent it will ask the bank for the transaction to be reversed and the funds returned."
What if someone accidentally transferred money into my account? ›
Assuming this is not a scam, you send it back. You should contact your bank, however, and ask them to confirm that the deposit was legitimate. For example, someone might send you money and then reverse the transaction. That way, when you “refund” it, you would actually be sending them money.
Can I keep money someone accidentally sent me? ›
If a stranger sends you money and requests you to return it, contact the payment app directly and don't communicate with the sender. The payment app or bank will reverse the charge if an accident truly occurred, or they will take the deposit out of your account as they determine its rightful owner.
Is it illegal to keep money accidentally put in your account? ›
No, you cannot keep money that is deposited in your account in error. You should alert your bank immediately and have the funds redirected to their rightful owner.
Are you legally obligated to return money paid in error? ›
It's important to know what your obligations are when you pay another party because in some situations you may be out the money. While the general rule is that you can get back money mistakenly paid to someone, this rule does not apply if the overpayment falls under the “voluntary payment doctrine.”
What if money randomly appeared in my account? ›
If you ever run into a situation where you notice an unexpected deposit, you should leave it alone and notify your financial institution as soon as possible. It's possible that the erroneous deposit is already on someone's radar and in the process of being reversed, but not always.
What should I do when random money is appearing in my bank account? ›
Contact your bank immediately if you suspect unauthorized transactions or money missing from your account, advises the Consumer Financial Protection Bureau.
What happens if I receive money from an unknown source? ›
Report any suspicious or unauthorised activity, including unknown incoming funds, to your bank immediately. They can provide guidance and take necessary actions to protect your account.
Even if the money is from your employer or from the taxman, you still need to let your bank know as you could get into trouble for just leaving the money in your account if you know it should not be there. Instead, you are expected to take reasonable steps to cancel the transfer or return it to the sender.
Can you get money back if paid into a wrong account? ›
If your money went to an invalid account, it will usually bounce back into your account. Retrieving a mistaken payment to a valid account can be more difficult. As a general rule, banks can reverse a payment made in error only with the consent of the person who received it.
How long does it take for money to bounce back from a wrong account? ›
If the unintended recipient does not establish that they are entitled to the funds within 10 business days then the recipient's bank must return the funds to your bank within 2 business days thereafter.
Do I have to return money sent to me by mistake? ›
Your car could be collecting your personal data — even your sexual orientation. Zelle told News4 that if you get money sent to your account by mistake, don't send it back to the sender unless you know them. Instead, they say to contact your bank, which may be able to help you return the payment.
Can you reverse an accidental payment? ›
If you've overpaid your bill, you can either request a refund from your issuer or just let the negative balance roll over to your next credit card bill.
What to do if you accidentally send someone money? ›
Speak to your bank
Make sure you have all your details handy (including details of the transaction). Your bank should act within 2 working days. They should contact the bank that's received the money and ask for the money to be returned.
Can you keep money if a company accidentally pays you? ›
What happens if your employer accidentally overpays you? The Federal Labor Standards Act (FLSA) gives legal rights to every company in the state to take back an overpayment from an employee, no matter the consequences.
Is it illegal to spend money accidentally transferred to you? ›
You should not spend or withdraw the money transferred into your account by mistake because it is not legally yours and you have to pay it back.
Can you keep money paid in error? ›
If you realise a payment has been made by mistake, notify your bank as soon as possible – it may be possible to stop or recover the payment before it reaches the recipient. If the money has already been received, notify the recipient as soon as possible in clear terms and request repayment.
Can I get my money back if I sent it to the wrong account? ›
It is not possible to get the money back without the consent of the wrong beneficiary. The process is a little tough, but he/she has to accept that there was a wrong transaction made to his/her account. Then, you need to contact your bank and communicate the matter in detail.
