theirstaxblog.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.

There is currently no specific legislation which protects you if a mistake is made with an online transaction – leaving you with a potential struggle to get your money back following an errant click of the mouse.

If you enter just one wrong digit in the bank account number of the transfer beneficiary you could be in for a serious problem. This could represent – in our estimation – a staggering £439m to Brits which even the Financial Ombudsman is powerless to assist in retrieving.

There's a good chance that your hard-earned cash will be gone for good if it lands in the account of a total stranger. Last year a bank worker found herself in this very position after accidentally transferring £2,000 into the wrong bank account.

The onus is on the person making the mistake to first contact their bank to request that the receiving bank contacts their customer asking them to return the money.

A bank may simply "request" that a payment made in error be refunded under current legislation. If that request is ignored or the bank refuses to act, there is nothing else that can be done by your bank.

As is it wasn't enough to have made the mistake in the first place, the Data Protection Act makes it hard for the person who made the error to get the money back, as the bank is not allowed to reveal customer details.

Without such details it would be impossible to take court action to retrieve the funds, as you wouldn't know who to chase for the money. Legally you could ask a judge to rule that the banks give up personal details so that you could take action against an individual, but this would cost you more money. Having already lost money through the original error, this is hardly the ideal option for getting it back.

So, as it stands, the person who has effectively swiped your money – even though technically it is not theft, as the money has been placed in their account without any action by them – is being helped by the legal system.

While you would hope that most people would do the right thing and give that money back, there is no guarantee – and having some extra cash appear out of nowhere while many people are struggling to make ends meet, is something that is likely to be hard to pass up.

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. Check, double check, and then triple check the account details you input. It's a good idea to ask a partner or housemate to check them for you as well.

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. If there is a chance for them to stop the payment before it leaves your account then a thorny problem could be avoided.

4. Avoid using online banking to transfer large amounts of money – this is risky and you should consider visiting a branch in person or using telephone banking for such a transaction. You will at least have some comeback then if the bank teller inputs the wrong details. If using online banking is better for you, then be extremely careful. For security reasons some banks have a £10,000 limit on daily transfer amounts anyway.

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