newtaxblog.com

By Alison Steed
MyMoneyDiva.com

Internet banking users have reached the highest level yet in the UK, with 22m banking online to deal with their current accounts, according to data from the Payments Council, yet online bankers could be losing a staggering £439m a year in transactions that go astray because of a lack of protection.

More than half of the 41.5m internet users are now banking online as a main way of dealing with their current account. Ninety per cent of us using online banking do so in order to check balances and statements, but increasingly we are also performing online transaction.

But if something goes wrong with an online transaction, you could seriously struggle to get your money back, as currently it is one of the few areas which is not covered by any form of specific legislation to help those who make a mistake.

A major problem can occur simply by typing one wrong number of the bank account to which you are transferring money. As much as £439m could have been "lost" to Britons alone in this way, and the Financial Ombudsman cannot even be called upon to help.

If your hard-earned cash goes to a stranger, then you may never see it again. Last year a bank worker found herself in this very position after accidentally transferring £2,000 into the wrong bank account.

Once the transfer has been processed to the other bank, the person who made the mistake must contact their own bank to request that the receiving bank gets in touch with their customer to ask for the return of the funds.

But the current law only allows the bank to "request" that a mistaken transfer be refunded. If that permission is denied, or the request is ignored, there is nothing else the bank can do.

The Data Protection Act prohibits the bank from revealing customer details, which means that it can be extremely difficult for the person who made the mistake to take legal action for the recovery of the money.

In turn this makes it impossible to chase any individual for the money as you wouldn't know who to take court action against. You could ask a judge to rule that the banks have to divulge the details so you can pursue the person, but this will cost you more money. Not exactly the ideal situation, being already out-of-pocket as a result of the initial mistake.

What this means is that a person on the receiving end of such a mistake could legally and legitimately 'steal' your money – albeit technically not actually theft – as the means by which they came about it had nothing to do with them.

As much as you would hope that the beneficiary of an unexpected amount of cash would be decent enough to give it straight back, they are not required to do so, and could come as a pleasant surprise to someone who may be struggling to pay the monthly bills.

We are working on trying to build a case for the law to be changed to offer more protection to online banking users, but for now, there are five top tips on what you can do to try to protect yourself:

1. Be sure to check the details you have entered closely. Ask another household member to check them with you if possible.

2. Be careful if you are choosing your recipient via a drop-down list option, which is a favourite of many online banks – it is very easy to select the wrong name.

3. Do not hesitate to contact the bank – even if this means sending an email in the middle of the night – the moment you realise a mistake has been made. The easiest way to solve the problem is to try and let the bank know before the money has actually left your account.

4. Transferring large amounts online is a risk, so perhaps if you have to move a significant amount of money from one account to another, you should consider going into the bank or using phone banking. That way, if the bank teller puts the wrong account details in, you have some comeback. If you do decide that online banking is better for you, take extra care when carrying out your transaction. Some banks will not allow you to transfer more than £10,000 in one day online anyway for security reasons.

5. If transferring a large sum, think about doing this as a series of smaller amounts to protect yourself if something should go wrong.

MyMoneyDiva.com would like to hear from anyone who has had problems along these lines. Please go to www.mymoneydiva.com/community and tell us about what happened.

Alison Steed is the editor of the personal finance website for women MyMoneyDiva.com.

Tags: bank accounts, data protection, finance information, financial ombudsman, id fraud, internet banking, online banking, personal finance, secure transactions