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Issue 25 - May 2016

Case studies

 

Mistaken internet payment – personal account.
The applicant completed an internet banking transfer, intending to transfer funds to his daughter’s account. However, one of the digits in the account number was wrong so the funds were credited to an unintended third party account. Two days later he reported the error to the sending financial services provider (FSP). The day after the FSP contacted the receiving FSP and requested a recall of the mistaken internet payment (MIP). Five days later the receiving FSP informed the FSP the funds were unavailable. Two days later the FSP made a second request to the receiving FSP to recover the MIP, but was unsuccessful.

FOS found that:

  • The FSP complied with the ePayments Code requirements in relation to MIPs by warning the applicant at the time he was making the payment that it does not check the account name against the account number and BSB and that funds could be credited to the wrong account if details are incorrect.
  • The FSP requested the return of the MIP from the receiving FSP in a timely manner and the receiving FSP responded within 5 days as required by the Code.
  • The FSP continued to try to recover the MIP, but was unable to do so through circumstances beyond its control.
  • No compensation was payable as there was no error by the FSP.

Note that the applicant’s daughter was able to lodge a claim as the intended recipient of the funds against the receiving FSP, whose obligations are different from the sending FSP (see The FOS Circular - Issue 9).
 

Mistaken internet payment – business account
The applicant was a business. When completing an internet banking transfer it mistakenly selected the incorrect payee in its internet banking profile, so the BSB and account numbers were incorrect. Therefore the funds were credited to an unintended third party’s account. It informed the sending FSP (FSP) of the error on the same day.

Three days later the FSP sent a recall request to the receiving FSP. The unintended recipient withdrew the funds three days after the request. A month after the recall request, the receiving FSP wrote to the FSP informing it that its attempts to recall the funds were unsuccessful. Two weeks later the FSP made a second recall request to the receiving FSP. A month after the second request, the receiving FSP informed the FSP that its further attempts to recall the funds were unsuccessful.

FOS found that:

  • Whilst the ePayments Code does not apply to business accounts, FOS considers complying with the obligations on FSPs for MIPs provided in the Code to be good industry practice for business accounts too. When a customer selects an incorrect payee from its internet banking list, this is considered a MIP and therefore the FSP has to comply with good industry practice when informed of it.
  • The FSP complied with good industry practice by warning the applicant at the time it was making the payment that it does not check the account name against the account number and BSB and that funds could be credited to the wrong account if details are incorrect.
  • In accordance with good industry practice, the FSP requested the return of the transfer from the receiving FSP within five business days.
  • The FSP continued to try to recover the transfer, but was unable to do so due to the delay in responding by the receiving FSP and the unintended recipient withdrawing the funds and failing to return them.
  • FOS can only review the action of the FSP as it provided a financial service to the applicant. It cannot consider the actions of the receiving FSP, which delayed in dealing with the recall requests, as the applicant did not receive a financial service from it.
  • Whilst FOS would have expected the FSP to chase the receiving FSP when it did not receive a response within the 10 business days required by good industry practice, as the funds were withdrawn by the unintended recipient within three business days of the FSP’s first recall request, it would not have made any difference. FOS would not expect the FSP to have chased the receiving FSP within the first three days.
  • No compensation was payable as there was no error by the FSP.
     

Serious credit infringement listing
The applicant was in default under a car loan and the FSP entered a serious credit infringement listing on the applicant’s commercial credit file. The applicant sought the removal of the listing on the basis that he was not notified that the listing would be made.

It was not disputed that the applicant:

  • was in default under the car loan
  • had signed a privacy consent form consenting to the FSP providing information to a credit reporting body
  • received a default notice in relation to the car loan.

FOS concluded that it was not reasonable for the FSP to have formed the opinion that the applicant no longer intended to comply with his/her obligations under the car loan, thereby committing a serious credit infringement. This was because in the lead up to the listing being made, the applicant had maintained contact with the FSP, confirmed a current residential address and mobile telephone number and made several payments to the loan including a payment six days prior to the listing being made.

FOS also considered whether the FSP could have instead entered a payment default on the applicant’s credit file. Although commercial credit information is largely unregulated (unlike consumer credit), FOS’s approach is that it is good industry practice for a credit provider to warn individuals that an overdue commercial credit payment might be reported to a credit reporting body.

The FSP had provided copies of notices it sent to the applicant in the lead up to the serious credit infringement listing being made. As none of these notices contained information that would constitute a warning to an individual that an overdue payment would be listed with a credit reporting body, FOS found that the FSP would not have been entitled to enter a payment default listing on the applicant’s credit file.  Accordingly, the FSP was required to remove the listing from the applicant’s credit file.

In addition to the removal of the listing, FOS also found that the applicant was entitled to compensation for stress and inconvenience in the sum of $2,500 for the erroneous serious credit infringement listing.

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