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1-digit mistake costs $40K

By Claes Bell, CFA · Bankrate.com
Thursday, February 28, 2013
Posted: 1 pm ET

Ever wonder why the human resources department at work is so very insistent that you staple a canceled check to your direct deposit form?

A recent report from Patrick Collinson of The Guardian illustrates why. In October, a  hairdresser in the United Kingdom named Sally Donaldson discovered that she had been mistakenly transferring her paycheck into someone else's checking account for two years.

Donaldson had arranged to have the money transferred from her HSBC account to her and her husband's joint account automatically every time she got paid, but she accidentally entered in one digit wrong while entering in her account number in the online form.

According to The Guardian report, she's been fighting for return of the money, which added up to 26,650 pounds, or about $40,000, with little success. The third party doesn't want to return the money, and their bank is prevented from sharing the customer's information with Donaldson.

So if something like this happened in the U.S., how would an American Sally Donaldson get her money back?

It's possible the Consumer Financial Protection Bureau might step in on behalf of a consumer in that situation, says Justin Hosie, an attorney and partner in the Tennessee office of the law firm Hudson Cook.

Regulation E, which is the law governing wire transfers and other online banking  transactions, doesn't specifically address this issue given the length of time this consumer took to address the issue. But the CFPB's unique role among financial regulators as a consumer advocate could lead it to contact the bank and try and persuade it to voluntarily turn over the money.

"If it was one of the banks that's over $10 billion in assets, the CFPB would have direct authority and you might actually have a shot at them exerting some pressure and forcing the right action," Hosie says.

Failing that, an American version of Donaldson could bring an unjust enrichment or other equitable lawsuit naming her bank, the bank that received the transfer, and the unnamed party in whose account the funds were deposited, Hosie says. There is likely a two-year statute of limitations that could keep some of the earliest transfers out of the suit, but considering the amount of money at stake, it would probably be worth it.

"If we're talking $40,000, I would say it's worth the legal action even if you end up paying one-third to some plaintiff's lawyer to get back two-thirds of it," Hosie says.

Assuming the rogue account holder hasn't already spent the money, the courts could force him or her to turn it over. And if the rogue account holder was insolvent, courts could garnish his or her wages to pay back the money.

"You or I, if we started to receive $5,000 a month just sort of by surprise into our checking accounts, we would as decent human beings say, 'Hey bank, something's going on here.' And we would be bad actors if we didn't do that," Hosie says. "I can't believe the courts wouldn't have any recourse."

Of course, the easier course of action is avoiding the situation in the first place.

Direct deposits and automatic transfers are powerful money management tools. Especially for those trying to build savings, they can help remove the temptation to spend money you'd like to save by whisking it out of your checking account before you can even start thinking about spending it.

But double- and even triple-checking the account numbers before arranging an automatic transfer seems like a good idea. And of course, exercise due diligence in making sure any money you transfer actually makes it into the second account so if some of your cash does get caught up in some kind of dispute, it won't involve two years' worth of paychecks.

What do you think? Should Donaldson have caught the error sooner? Should the banks involved cough up the money on their own? Have you ever had a money transfer go bad?

Follow me on Twitter: @ClaesBell.

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19 Comments
Dwayne
April 01, 2013 at 6:35 pm

@ Roy, "i can't believe it took 2 years to notice - Her Fault" I agree, but then again, the recipient who got the money for no reason isn't innocent either. If I got money coming in every month and I didn't work for it, or put it there, I would have been calling my bank and the bank would have put a reverse investigation on it. 2 years? the recipient is as much if not more at fault then the person who goofed.

Josh
March 26, 2013 at 1:30 pm

The legal principle of "Qui tacet consentire videtur, ubi loqui debuit ac potuit" is right on target for this case.

Basically, Sally Donaldson keeping silent for 2 years, is her giving legal consent for the other party to keep the money.

I doubt any court would order the recipient to return the money.

Rick
March 25, 2013 at 5:54 pm

If my business told me I had been paid but I noticed the money was going to the wrong account, it wouldn't take me two years to cancel the direct deposit.

Matt kissell
March 20, 2013 at 10:03 am

I smell something fishy. You mean to tell me that she didnt notice that she hadnt recieved any pay for 2 years. I call BS or she was so rich to begin with that the money didnt matter anyway. The real fact of the matter is that you have 30 days to call attention to a banking error. After that you have no recourse to get anything back. As far as the people on the other end..it is not their responsibily or need to report the extra money. They should not spend it until after the 30 day period is up otherwise they may have to return it, but it is the banks responsibilty to catch and fix the error. There was an hour long CBS special years ago that dealt with exactly this situation. A man dpeosited one of those "fake" youve won a million dollars checks from sweepstakes that come in the mail. He did not spend any of the money for 30 days. Eventually the bank caught the error and tried to take the money. He got to keep all of the 1 million dollar fake check because the bank failed to correct the error within the alotted time.

sidney
March 08, 2013 at 3:43 pm

go roy the world is full of idiots not thieves

winifred brewer
March 08, 2013 at 2:45 pm

if someone doesn't notice for two years that her deposits have not been credited, why is it not possible for someone else not to notice unexplained deposits in their account? we may be dealing with TWO flakey individuals who never balanced their accounts.

Citygirl
March 08, 2013 at 2:31 pm

Many years ago money started appearing in my checking account, apparently because someone had an error on the numbers on their checks. I reported the issue to an unfriendly person at the bank, but the money kept coming in. I tried to report it again, and was sent somewhere, where I was made to sit and wait for a very long time. I don't remember ever talking to anyone, I may have just given up and went back to my job where I was scolded for being away for so long. Frustrated, I finally just closed the account and kept all the money.

Julie Trenton
March 08, 2013 at 12:56 pm

She must have so much money that she did not notice a lack of increase in her checking account balance. I guess she has never balanced her checkbook. And I ask... why now? Why did she notice this error at this point in time?

The other person is a thief. They need to return the money. They did not earn it and it was not a gift. I am shocked that they did not notify the bank when they had the first deposit that did not belong to them. Greed and ill-gotten gains will be paid for.

I believe in karma and I would not want to be in the thief's shoes if they do not return the money.

Roy
March 08, 2013 at 10:54 am

I can't believe it took 2 years to notice the mistake...Her Fault.

I can't believe the wrong account didn't say something...Their Fault.

A world of idiots & thieves...Our Fault.