What to do when you get a banking error

What would you do if a million dollars appeared in your account one day? What about four million?

The case of the ‘free’ millions

One Sydney university student spent millions of dollars after a Westpac bank error gave her access to an unlimited overdraft on her account. Between 2015 and 2016, police say Christine Lee overdrew $4.6 million and spent a large amount of the cash on designer handbags, shoes and other luxury items.

Westpac was only alerted to the error when Ms Lee transferred $1.15 million to her PayPal account over a day. Ms Lee was arrested in May 2016 when she tried to fly home to Malaysia and was charged with fraud and knowingly dealing with the proceeds of crime.

Ms Lee returned goods to the tune of about $1 million, including a Cartier bracelet and Dior and Hermes handbags, and Westpac was given a court order allowing it to seize any other assets to repay the remaining funds.

Westpac says it took civil action to recover the funds. However, the criminal charges against Ms Lee were later dropped after a similar banking error case was thrown out. In that case, Goulburn man Luke Moore withdrew $2.1 million after a St.George bank error allowed him to keep withdrawing money from ATMs, even when there was no money in his account. Mr Moore was initially found guilty of fraud and dealing with the proceeds of crime. This conviction was later quashed on appeal after the court found there was no deception, an element of fraud.

What happens if you have a bank error?

If you have a bank error, different things can happen, depending on whether too much money has come into your account, or too much has gone out, and how you respond to the situation as a customer

When too much money comes into your account

If money is incorrectly transferred into your account or you notice another bank error, you should notify your bank. The Australian Financial Complaints Authority says you should not spend or withdraw money that is transferred into your account by mistake because it is not legally yours and you will have to pay it back. Unlike the ‘bank error in your favour’ card in Monopoly, you generally won’t get to keep money given to you in error in this type of situation.

When too much money comes out of your account

If money is incorrectly debited from your account, you should also notify your bank. This may be an unauthorised transaction. According to ASIC’s Moneysmart, you’re more likely to get your money back if:

• you were charged fraudulently by a bank employee or seller
• you were incorrectly charged more than once by a seller
• you were charged after you told your bank that your card was lost or stolen or that someone else may know your PIN or password
• the card used was forged, expired, blocked or cancelled
• the transaction happened before you got your card, PIN or password
• it’s clear that you haven’t contributed to the loss

But you are less likely to get your money back if you:

• acted fraudulently
• didn’t keep your PIN or password secret
• unreasonably delayed telling your bank that your card was lost or stolen or that someone else might know your PIN or password
• accidentally left your card in an ATM

How can I avoid bank errors?

While there’s no surefire way to avoid bank errors, one thing you can do is check your account regularly and keep an eye out for any unexpected transactions.

What should you do about a bank error?

If you do notice a bank error, you should contact your bank as soon as possible and ask them to investigate. ASIC adds that if you aren’t happy with your bank’s response, you can ask them for their complaints handling process and put your complaint in writing, using Moneysmart’s letter tips. If you are still unhappy or don’t get feedback in a reasonable time, you can complain to AFCA.

Cover image source: M.Pakats/Shutterstock.com.