Banking Error In Your Favour…Or Is it?

What would you do if a million dollars appeared in your account one day? How about $4 million?

The case of the “free” millions

One chemical engineering student from Sydney spent $4.6 million when Westpac made a banking error in her favour and granted her an unlimited overdraft facility.

Four years after opening the account, Christine Jia Xin Lee, 21, has been arrested while trying to board a flight home to Malaysia from Sydney International Airport with an emergency-issue passport. Ms Lee spent the night in jail, but in May 2016 a Magistrate has ruled she did not break the law as Westpac gave her the money and she was not making transactions illegally. That doesn’t mean she doesn’t have to pay the money back though!

Ms Lee was only 17 years old when the error was made in 2012, and it was the first bank account she had ever opened, so she says she didn’t even notice the overdraft was available until 2014 when she began using it. She spent around $1 million on handbags, clothing, jewellery, sunglasses, a selfie camera, and a deluxe vacuum cleaner, and another $3.5 million on other withdrawals.

Magistrate Stapleton stated in her reasons for the decision on May 5, “She didn’t take it from them. They gave it to her.”

Magistrate Stapleton added that while Ms Lee would have to repay the bank’s money that she spent, she had not broken the law.

The court’s decision that Ms Lee did nothing wrong has been strongly questioned, given the circumstances of the case. When opening the account, Ms Lee signed a standard contract that required she wouldn’t overdraw the account and would notify the bank of any errors on the account.

Westpac had previously frozen Ms Lee’s account after a fraudulent transaction in 2013 had deposited money incorrectly into her account. In doing so, they also applied ‘Manager 321 Status’ to the account so that it could be investigated from headquarters without branch interference. After the fraud was corrected and the freeze removed, the Manager 321 Status remained, meaning the Westpac branch responsible for Ms Lee’s account was no longer aware of her spending on the account or overdraft.

The only reason Westpac realised their error at all was because her PayPal account broke the $1 million spending mark, which triggered an alert in Westpac’s Product Risk department.

After Westpac realised their error and froze Ms Lee’s account on 7 April 2015, Ms Lee returned the luxury goods she had bought and the $1 million processed through PayPal was recovered. Westpac then began pursuing the remaining $3.5 million debt.

She failed to appear at the Federal Court and was declared an unregistered bankrupt in September 2015. Police issued a warrant for her arrest in March 2016, upon which Ms Lee made an emergency application for a replacement passport to return to Malaysia, saying she had lost her old passport.

Ms Lee claims she thought the money she was spending on the overdraft was being paid for by her wealthy parents.

What happens if the bank makes an error on your account?

When too much money comes into your account

There’s no such thing as free money, even when a bank error deposits “extra” money into your account. This is usually because the money was supposed to be deposited into someone else’s account, so technically they still own that money.

We all enjoy getting the “bank error in your favour” card from the Community Chest in Monopoly, but sadly, in real life you don’t get to keep the money credited to you by a bank error.

When too much money comes out of your account

With all or nearly all institutions, you are not liable for errors that are not in your favour, where money has come out of your account without you knowing about it. There are some cases where you do get the money back if the bank or someone else accidentally takes too much, and other cases where you don’t get back what you’ve lost, usually because it was partially your fault it happened.

You can get your money back when it wasn’t your fault:

  • A fraudulent transaction is made, taking money out of your card or account without your consent. This includes if someone steals your card or your PIN number, forges your card, or uses an expired PIN or card to make the transaction.
  • A transaction is made before you actually receive your card, PIN, or pass code.
  • A merchant charges your account more than once for the one transaction.
  • A transaction is made after you’ve told your bank that your card is lost or stolen, or that someone has found out your PIN or password.
  • You have not contributed to the loss in any way.
  • You made a genuine mistake when entering account or BSB details for a transaction, but you contact your bank within 10 days, and the money is still sitting in the recipient’s account. After 10 days, the process will be slower but you should still get the money back. After 7 months, you are unlikely to get your money back because the recipient is likely to have spent it, and they now have the right to refuse to return that money to you.

You won’t get your money back when the error is partially your fault:

  • You were doing something illegal or processing a fraudulent transaction.
  • You didn’t keep your PIN or passwords secret, or left your card sitting in the ATM.
  • You didn’t tell your bank right away when you realised your card was lost or stolen. (The “Lock, Block, Limit” feature available in many mobile banking apps comes in handy here, letting you lock the card while you look around the house for it.)
  • You made a mistake in processing a transaction and paid the wrong company or person by inputting an incorrect BSB or account number, but you didn’t contact the bank before the recipient spent the money you sent.

But don’t despair. ASIC says that even if an error was your fault, the amount of money that you are liable for (the amount you wouldn’t get back) is still subject to certain caps.

Easy ways to avoid errors

In general, when you sign up for a bank account the contract will state that you must notify the bank of any errors you see in your account or your transaction list. So it pays to check your account regularly.

That may sound like a daunting task, especially if you hold multiple accounts or cards – but it doesn’t have to be. One way to make life easier is to use a great mobile banking app. It doesn’t take much effort to login to the app every Saturday and check the week’s transactions all look in order.

You can typically check your latest transactions for an account for up to 6 months’ to 2 years’ worth of history. Most mobile banking apps also provide “Quick Balances” so that you can view your account balances for multiple accounts on one screen, and select the one you want to view more detail. Even better, you can do it sitting on the couch during a Netflix binge or standing in the middle of a cricket field waiting for something – anything – to happen.

If you’re not keen on doing your banking on your Samsung or iPhone, online banking platforms offer the same easy methods to check your recent transactions, personal details, upcoming scheduled payments, and more. An outstanding value platform will provide graphing tools where you can check the progress of your account over time. That way, $4.6 million worth of spending can’t “sneak up on you”.

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