Johnny asks: “A staff member requested a loan of £500. The loan payment to this staff member was made, however it was accidentally made for £5,000 instead of £500. Is there any piece of legislation that allows me to issue a statutory demand for a refund?”
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Q&A 36 – Can I Keep A Payment Made In Error? – Shownotes
Today’s question comes from Johnny:
A member of staff requested a loan of £500 in May 2015. The loan payment to this staff member was made, however it was accidentally made for £5,000 instead of £500. This was only discovered about 40 days afterwards. This payment was made in absolute error, from a business to an individual.
Is there any piece of legislation that allows me to issue a statutory demand for a refund?
Thanks for your question Johnny – a fairly straight-forward this one.
It’s Illegal To Keep A Payment Made In Error
There is a legal framework established which dictates that for all payments made in error, it would be illegal for the recipient to knowingly keep the cash.
Simply, from a legal viewpoint, if a sum of money is accidentally paid into your bank or savings account and you know that it doesn’t belong to you, then you must pay it back.
In your question Johnny, the staff member clearly knew that the payment was supposed to be made for £500 as this was the loan amount that they requested.
Therefore, if they keep any money wrongly credited to their account, they could be charged with a crime which is fairly appropriately named as: ‘Retaining wrongful credit’.
1968 Theft Act
Again, the 1968 Theft act defines this as: “A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it”. It doesn’t matter whether the payment was made from a business to a business, individual to an individual or any combination of those two. It’s still illegal to keep the money.
So, get in contact with the staff member, show them the legislation in this area and make it clear to them that they are committing an illegal offence by keeping the cash.
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Have a great weekend everyone!
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Years back, I was let go by a company, yet they kept the direct deposit going for at least 3-4 pay periods. Every two weeks, I would dutifully e-mail the HR person and they’d tell me that they were working on it. The money just sat there, until they finally told me I needed to send it back. I actually wrote back and proposed that I get to keep a portion of it because of the annoyance that it had caused me, and because I had been up front about it, they agreed.