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1-digit mistake costs $40K

By Claes Bell ·
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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March 08, 2013 at 8:33 am

If a one-digit error caused her that kind of grief over 2 years, she should stay clear of pi.

March 08, 2013 at 7:44 am

OK -
No. 1 - The banks shouldn't be liable. They did exactly what
they were instructed to do.
No. 2 - Sally made the mistake - (she has got to be a blonde)
she suffers the consequences.
No. 3 - Third party, no error. If there is some law (there
probably is) addressing unjust enrichment, that shoul
be her only recourse.
No. 4 - I hope the third party reported the income! If they
didn't, in this country, deal with the IRS or return
the money? Easy - return the money. If not, they could
face interest charges, penalties and possibly jail time.

March 08, 2013 at 6:40 am

How stupid must you be to have this happen for 2 years & never notice that your money isn't going into your account ??
I'd say she blew it.

Chris Koffend
March 01, 2013 at 4:17 pm

It was clearly her mistake. If it happened for one or two transfers, she should have the transfer reversed. However, after a few months (and certainly after two years) she should not be eligible to require the return of her money. She was careless and this is her stupid tax.

By no means should either of the banks be accountable for her mistake and negligence that spanned 2 years. The banks both did exactly what she instructed them to do.

The only negligent person in this story is the lady.

That being said, the recipient should have spoken up and should be open to returning the money. The IRS sent me a second tax refund one year for roughly $10K. I notified them, they said they didn't see any problem. I put the funds in savings - untouched. Almost two years later they sent me a bill and tried to charge me interest (unsuccessfully).

March 01, 2013 at 3:37 pm

How do you go TWO YEARS and not know you are missing monthly deposits? I have been using online banking for over 15 years, I check my accounts at least once a day, maybe even more if I am expecting a transaction. There are email alerts and text alerts that can be easily set up to alert you of a deposit.

And even an idiot would get PAPER STATEMENTS and look through them every now and then! This woman obviously does not need the money cause she did not even know it was missing for two years!

There has to be more to the story cause I do not get how someone can miss money like that on a monthly basis??????

March 01, 2013 at 2:35 pm

This is absolutely ridiculous. How do you go a whole year, let alone TWO YEARS, without a paycheck. This is just absolutely insane. That woman deserved to lose her paycheck if she didn't notice it missing for that long.

March 01, 2013 at 11:17 am


You have got to be kidding me. I don't want to go back to the... gosh... if you say rule 1 is use cash when feasible, I don't know how far back I would have to go...

I like modern banking. I like being able to deposit checks using my cell phone. I like being able to pay with a plastic card.

There is no reason I should require my bank to send me my physical checks and deposit slips. A responsible adult can monitor his/her accounts online with as much, or more, accuracy.

The only rule that makes any sense is #3. If she had just looked at her account transactions once during that time, she would have noticed this.

March 01, 2013 at 9:22 am

Stated more correctly, direct deposit, transfer, and bill pay is cursed. Simple for the banks computer, but nothing but a disaster down the pike. Rule 1: Cash when it's feasible, Rule 2: Require, again, that banks return paper cancelled checks and deposit slips for you to check diligently, Rule 3: Look at your bank statement and ask: Is it right? Does it make sense? Rule 4: COMPLAIN LOUDLY

March 01, 2013 at 7:36 am

Sorry, but this isn't a simple, 1-digit mistake - it stopped being that somwhere in month 2. This is gross incompentence. If money is recovered it should be given to charity as Sally clearly isn't up to the challenge.

Kay Bell
February 28, 2013 at 4:30 pm

Since it's tax season and I'm a tax geek, I must add that you need to check with your bank re the routing number for IRS refund direct deposits. I learned last year that the routing number to have Treasury send money to my checking account is different from the routing number used for non-governmental direct deposits.