COMMENT
Bank Error In Your Favour?

A question that crops up surprisingly frequently on our Legal Issues discussion board goes something like this: "My bank account has been accidentally credited with £xxx - do I have to give the money back or can I spend it? Where do I stand legally?"

I'm sure we'd all know as a matter of conscience that we shouldn't keep the money but you'd be surprised at the number of people who think they should be entitled to it on the basis that it's the bank's fault so they should suffer the loss.

The Financial Ombudsman is pretty clear on his approach to cases like these. Customers must usually repay money that does not belong to them. However...!

What happens if you truly believe, in good faith, that the money is yours and you happily go and spend it only to find that the bank suddenly realises its mistake and demands it back? Surely it would be unfair for you to have to pay it back?

In this instance, the Ombudsman will come down on the side of the customer if they have 'changed their position' through believing, in good faith, that the money was theirs - for example, by buying something that they would not otherwise have bought. Spending it on ordinary, day-to-day things doesn't count as 'a change of position' - it has to be a situation where it would be positively unfair to expect the customer to pay it back.

For example, one bank mistakenly credited Mr B's current account with £3,000 intended for another customer with a similar name. He claimed he'd been expecting some money in from some work he'd carried out and had assumed that was where it had come from so he withdrew it and used it to pay off a loan from his brother. The Ombudsman's view was that his position hadn't actually changed - he'd owed his brother £3,000, now he owed the bank the £3,000. He had to pay it back.

However, in another instance, a customer was accidentally credited twice with funds of £90,000. When the mistake was discovered, the bank froze his account which prevented him from paying bills connected with his business. As a result, his business lost a whopping £70,000 - all because of a mistaken credit. The Ombudsman made the bank pay him the £70,000 plus compensation - and quite right too!

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