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17 Feb 2022

Commercial litigation

Accidental payments into your account – a dream come true or a legal nightmare?

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 circumstances 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.

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