The Banking Ombudsman said banks could generally reverse a mistaken payment if they had the consent of the person who received it,. Photo: 3dart/123RF
People who accidentally send money to the wrong person may find they're on their own when it comes to trying to get it back.
The NZ Herald reported at the weekend that Mt Roskill pensioner Andrew Che Sit Bong said he "lost everything" when he sent his retirement savings to the wrong account number while transferring money from the UK to New Zealand.
The bank was able to recover $28,000 but by the time he realised his mistake, the recipient had spent the rest of the $158,000.
Banking Ombudsman Nicola Sladden said banks could generally reverse a mistaken payment if they had the consent of the person who received it,.
"Your bank and the recipient's bank will need to co-operate to try to recover the payment. This usually involves the recipient's bank contacting the account holder to ask his or her permission to reverse the transaction."
But she said if the recipient did not agree, the situation would be different.
"If the recipient refuses, your only option is to take up the matter directly yourself. You may wish to take legal action if the recipient won't return the money.
"Banks have begun matching account names and numbers to try to prevent mistaken payments, as well as prevent scams, using what is known as a confirmation of payee service."
In one case that the Banking Ombudsman investigated, a woman made a payment of $10,000, which she intended to go to her son.
But it went to another person she had previously paid money to.
She made another two payments of $10,000 and $15,000 before she noticed the mistake and asked for the money back.
The recipient refused.
The woman asked the bank to compensate her because she said it would not have happened if the bank had matched the name and account number.
The ombudsman investigation noted that the bank's terms and conditions said it was not liable for losses caused by customer errors.
"We did not uphold [the] complaint, although we shared our recommendation about reviewing how banks communicated the fact they do not match account names and numbers with all other banks [at the time]."
Consumer NZ spokesperson Sahar Lone said in situations where a payment was mistakenly sent to the wrong account, it was best to "take the matter to the Banking Ombudsman, seek legal advice, and contact the police, as unfortunately, it can be a tricky situation to resolve".
She said if people made a payment to an account that did not exist, the money would usually "bounce back".
Sladden said people who received a payment they were not expecting should contact the bank as soon as they could.
"And once you have been asked for your consent to reverse the payment to its rightful owner, you should agree. Some people feel they should be allowed to keep money paid into their account, but in general they should return money that does not belong to them."
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