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. The most common uses are to check balances and check statements – around nine in 10 of us using online banking do so for these reasons – but an increasing number of us are undertaking online transactions.

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.

One small typo when transferring money to another bank account could land you with a serious problem. In our estimation, this could be costing Brits a staggering £439m – and not even the Financial Ombudsman can help you get the money back.

You may well never see that hard-earned cash again if it goes into the account of a stranger. Last year a bank worker found herself in this very position after accidentally transferring £2,000 into the wrong bank account.

If a mistaken transfer is being processed already, the person who made the error must first contact their bank who can then only request that the receiving bank contacts the beneficiary of the funds to ask that they be returned.

A bank may simply "request" that a payment made in error be refunded under current legislation. If the receiving bank chooses to deny permission or to ignore the request entirely, there is nothing your bank can do.

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. 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 ideal when you have already lost money because of a simple mistake in the first place.

As it stands then, the law, as they had no hand in that money appearing in their account – 'stolen' your money.

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. Ensure you have selected the correct name if choosing from a drop-down list – a banking favourite where mistakes can easily occur.

3. If you do realise that you've made a mistake do not wait until the bank opens to report it – send an email in the middle of the night if necessary. If there is a chance for them to stop the payment before it leaves your account then a thorny problem could be avoided.

4. Consider using telephone banking or going into a branch of your bank if you have a large amount of money to transfer – using online banking for large amounts is risky. At least then you will not be at fault if the wrong details are entered and will have some comeback. If you do decide that online banking is better for you, take extra care when carrying out your transaction. Many banks will have a limit on how much can be transferred in one day in any case – usually this is around £10,000.

5. In order to minimise losses should something go wrong, think about transferring largers sums as a series of smaller transactions.

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