Bank Error in Your Favor?
What would you do if you discovered that your bank had accidentally extended you 100x more credit than you were approved for? Would you transfer it to your savings account and leave the country?
That’s exactly what a New Zealand couple did in 2009 when they discovered their bank had approved them for a $10,000,000 credit line. Not surprisingly, they’ve since been arrested and are being prosecuted for their mis-deeds.
Admittedly, this is a pretty extreme (an convoluted) case. What started out as a simple error was compounded when the recipients decided to take the extra step and turn it into credit fraud.
But what about a more straightforward bank error. For example, you deposit $100 and you somehow get credited for $1000. Is this like the old Monopoly card? Do you get to keep the cash?
Sadly — for you, but happily for the bank and its shareholders — the answer is “no”. Bank errors in your favor aren’t a windfall, and they can turn out to be quite a hassle. Just think… You spend the money down, the bank corrects the error, and a bunch of checks bounce.
And guess what? Banks typically have a long time to correct such errors. The exact rules vary by state, but we’re talking years. And they don’t have to ask your permission or even notify you before doing so.
What about errors in the banks favor? Same deal. You’re entitled to have them reversed. But here’s the catch… Following the date the statement containing an error was sent, you have 30 days (for paper checks) or 60 days (for electronic transactions) to report such errors. After that, you’re relying on the good graces of your bank to rectify the situation.
Oh, and for the record… The same general rules apply to erroneous tax refunds — if it’s not actually your money, you can’t reasonably expect to keep it. In general terms, if you receive a deposit that you’re not expecting, don’t go spending it until you’ve investigated and confirmed that you’re actually entitled to the money.
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Filed under: Banking
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
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May 21st, 2012 at 10:48 am
My employer switched payroll processors recently. The new processor (the famous one with the 3-letter name) ran a “test” payroll that unfortunately went to the production servers. Everyone got paid twice! Some bozos actually thought they could keep the extra payroll and were a little surprised when the transaction was promptly reversed.
May 21st, 2012 at 1:59 pm
Well, if I got an extra $10 mil…just kidding. Even a small error will eventually be discovered, so best just to call them and get it over quickly. Then again, if it really was $10 mil maybe I’d wait a few days just for fun…
May 21st, 2012 at 2:56 pm
This is a good point. I think a lot of people have the misconception that bank errors in their favor are free money somehow.
May 21st, 2012 at 8:18 pm
Whenever I get erroneous extra money the first thing I do is call whoever made the error because I don’t want them charging me interest or something bogus like that for the time I’ve kept the money. I love the double standard though that you only have 30-60 days to catch the mistakes but if a bank makes a mistake in your favor they have longer.
May 22nd, 2012 at 2:02 pm
I agree regarding the bank error, but disagree on the credit line extension. If the bank offers a line of credit for $10 million, there’s nothing wrong with taking that credit provided you intend to pay it back and not steal it.
If you disagree, then anybody who ever had to file bankruptcy for not being able to pay their credit card debt should go to jail….that doesn’t seem right, does it?
I would like to see more accountability and responsibility on the part of financial institutions. They shouldn’t loan any money if they cannot reasonably expect to get it back. Look at the whole housing/mortgage mess! I say screw the banks, not taxpayers.