How to recover incorrectly deposited money?

March 18, 2005 11:28 PM

If I attempt to make a payment to someone by direct deposit into their bank account, but deposit it into the wrong account, what legal means do I have to recover the money?

Let's avoid the complications of international transactions, and assume all of this is occuring locally. Let's also assume that everything is legitimate, and that it is just an honest mistake. Am I out of luck?

posted by randomstriker to work & money (15 comments total)

Look at "legal means" as a last resort. Contact the bank, explain the situation. Have them contact the other party and explain the situation. Maybe chances are good that the lucky winners will simply give it back.

Trust me, sue someone and you're more likely to lose, no matter what the issue is. Then you'll be out even more cash.
posted by zardoz at 12:42 AM on March 19, 2005

The forms you signed most likely put all of the responsibility for entering correct information on your shoulders and excuse the bank from any liability at all. So, as zardoz says, you probably don't have a legal leg to stand on.

However, this happens all the time. The bank wants to ensure that you are able to conduct the transaction you intend to conduct, even if you mistakenly provide bad information. The receiving party will most likely have more difficulty accepting unknown cash (how are they going to account for it?). They won't be jumping up and down and inviting all their friends over for free sushi.

The best way to approach this issue is to communicate with the bank. Don't be afraid to tell them that you know you made a mistake, it was your first time, etc. Sometimes the chattiness is helpful, but don't go to far. Get to the point and provide them with all the information that you need. The bank will do everything that it can do to help you, as long as you are asking for help. If you get irate at them, then they can always back off and point to the documents you signed.

If you have to go down to the actual bank office, it definitely helps to be present yourself well. Wear the kind of clothes that other business people in the area seem to wear (a button-down shirt is usually sufficient in California, a coat+tie is probaby a good idea on the East Coast). Your bank might be full of a bunch of lazy slackers, but banking is all about maintaining that professional image, and they will respect you for trying to do your part. Even if you are really a disorganized slacker.
posted by b1tr0t at 1:14 AM on March 19, 2005

zardoz -- by legal means I was hoping for some facility in common law, rather than civil law. If you or anyone else is aware of one, please let me know. I completely agree that a civil suit is the nuclear option.

This is a purely hypothetical situation, by the way. One of my responsibilities at work is to sign off on direct deposits of refunded pension contributions. I've always wondered how we'd deal with a misdirected transfer due to a clerical error. Fortunately the banks are reasonably conscientious about their own checks and balances and have caught all the mistakes we make so far. Knock on wood.
posted by randomstriker at 1:27 AM on March 19, 2005

Banks are essentially risk-reduction machines. They will go out of their way to make sure that they can get their way if it comes to that, but they also want to retain customers. Particularly large corporate customers that make regular direct deposits.

The securities industry makes their customers agree to binding arbitration, I'm not sure if banks do the same thing.

Any questions beyond "what is common practice when dealing with a bank" should be refered to an attorney that specializes in the banking sector. If you need an action item, tell your manager that you want to contract the attorney to write a legal form letter for communicating with the bank in situations where an incorrect payment has been made.

I am not a banker or a lawyer.
posted by b1tr0t at 1:40 AM on March 19, 2005

Definitely contact the bank.

Last year, when two departments were wrangling over who had to pay my salary, one of the departments decided that not only wasn't it responsible, but that it was disavowing responsibilty for the last X number of paychecks as well. Accordingly, they withdrew $13000 from my direct-deposit account - with no warning whatsoever. The bank was pleased to do this, as it allowed them to charge me an overdraft fee, as well as $133 of interest on the 3 days that passed before I discovered the 'error'.

It took me 6 months to get the money back, too. The lesson for you is that you can get your money back; for me and hopefully everyone else reading, it's "Be careful to whom you give unlimited access to your bank account."
posted by ikkyu2 at 2:27 AM on March 19, 2005

You can ask to "stop payment", but it's iffy. I'd walk in and speak to a manager right away.
posted by amberglow at 7:38 AM on March 19, 2005

If a payment is directed to the wrong account due to no error on the part of the depositng bank, the sending bank generally has to recall the funds and then resend the transaction. (I just had to deal with this the other day actually.) I beleive it has something to do with NACHA (National Automated Clearing House Association) rules. How the bank would handle it if it was the customer's, rather than their processor's fault, is sort of up for grabs. I imagine that you would end up paying any fees incurred in the process, but other than that, I can't see why they wouldn't recall the transaction at your request.
posted by Medieval Maven at 7:57 AM on March 19, 2005

From sad experience, when it is clearly your error, the banks will gladly reverse the transaction out of the receiving account, at no or nominal charge, if there is money in the receiving account.

If, however, the account holder was quick on the move and pulled out the cash, you'll simply have a bank error claim. If and when the bank can get back the money, they'll give it to you, net of their collection costs. If they don't get the money back, you don't get the money back, either.

The tougher case is if the receiving account was overdrawn or was collateralizing a line of credit or somthing. In that case you'll get your moeny back but the delay might be considerable.
posted by MattD at 8:03 AM on March 19, 2005

Some Australian experiences. I had money deposited into my account. In my case, the bank froze the money almost immediately and then sent me a letter explaining what had happened and asking me to sign a release for the money to be taken out of my account (which I did). All this ended up taking more than a month with me being cooperative. My grandfather had his tax refund deposited into someone else's account. In that case, it took us a while to work out why he hadn't received the money and so by the time the bank was approached, the person in question had spent some of the money and was not in a position to immediately return it (and wasn't being particularly cooperative). So it took a few months to sort out, but we did get the money back in the end.

Now.. the legal side of it. I did do something specifically about this in class, but can't remember all the details, so this is rough. It is Australian (and we learnt state specific stuff), but it would apply to at least some other common law countries (my state's theft law is basically identical to British theft law).

This can be covered by a criminal property offence (and I don't remember precisely which). In a case where they know of the error, spend the money anyway and refuse to return it, there is something they can be charged with. So if they refuse to return it, it can become a police matter, which may encourage them to return it. Of course, it is more complicated than that, but that's the broad version. The criminal approach doesn't ensure you get your money back, but it might encourage. No idea how this applies where you are.

It could, of course, be solved via civil suit means instead. There is a defence of sorts though where if they spent the money and at the time of spending it, truly believed it to be their own AND spent it on something other than normal living expenses, they may not be under an obligation to return it. Again.. an Australian perspective.
posted by AnnaRat at 8:05 AM on March 19, 2005

"Accordingly, they withdrew $13000 from my direct-deposit account "

And I was going to set up direct deposit one of these days. Not anymore.
posted by TheOnlyCoolTim at 9:44 AM on March 19, 2005

Um...does this mean that when you authorize someone to direct-deposit into your account, you are somehow also authorizing them to withdraw arbitrary amounts from your account whenever they want?
posted by bingo at 5:55 PM on March 19, 2005

Um...does this mean that when you authorize someone to direct-deposit into your account, you are somehow also authorizing them to withdraw arbitrary amounts from your account whenever they want?

Well, a direct depositor has your account number and the bank's routing number, which is exactly what they need to transfer money from your account as well as to it.

If they don't have your permission, of course, it is theft to do so.
posted by kindall at 8:32 PM on March 19, 2005

bingo - Read the agreement you sign for direct deposit. It is usually very biased. I skipped signing one a couple of years ago because it boiled down to "we can take all of your money if we want to, and you have to prove that it was our fault". Not that I think it would hold up in court, but it wasn't worth the risk.

Also, consider multiple bank accounts for this purpose. I collect credit union accounts just in case I need them.
posted by bh at 1:20 AM on March 20, 2005

bingo - when I signed up for direct deposit with my employer, that's exactly what the agreement said. Fortunately, I more-or-less trust my employer. bh's idea is a good one though.
posted by hattifattener at 12:10 AM on March 28, 2005

Um...does this mean that when you authorize someone to direct-deposit into your account, you are somehow also authorizing them to withdraw arbitrary amounts from your account whenever they want?

Yes.

Well, a direct depositor has your account number and the bank's routing number, which is exactly what they need to transfer money from your account as well as to it.

If they don't have your permission, of course, it is theft to do so.

Someone didn't read the fine print. Not surprising - I didn't, either. When you signed up for direct deposit, you gave them permission to "correct any errors." That means they can decide that everything they ever deposited into your account was deposited "in error" and you can't do anything about it, short of hiring a lawyer.
posted by ikkyu2 at 7:01 AM on March 29, 2005