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Bank Error in Your Favor: What Happens Next?

Bank Error in Your Favor: What Happens Next?
Sulaiman Abdur-Rahman
Sulaiman Abdur-RahmanUpdated June 8, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
A bank error in your favor is generally when a bank adds funds to your account by mistake. For example, a bank crediting $25K to your account by mistake is an example of a bank error in your favor. You don’t have a right to use the mistaken funds if a bank accidentally gives you money.Even if there’s no specific bank error in your favor law, it’s generally a bad idea to exploit the mistake for unjust enrichment. Banks may contact the authorities if you knowingly spend large amounts of money received in error. Below we highlight what happens if a bank accidentally gives you money.

What Is Considered a Bank Error?

A bank error is an erroneous transaction affecting a customer’s deposit account. Here are some examples of a bank error:Bank errors may occur from time to time, and they may not always be in your favor. You may submit a complaint to the Consumer Financial Protection Bureau (CFPB) whenever you’ve been wronged by a financial institution. You may file a CFPB complaint online.

When Does a Bank Error Happen?

A bank error happens whenever a financial institution causes a faulty transaction that affects a customer’s deposit account. Such mistakes can happen at any time and on any given day. Banks may acknowledge the possibility of such errors in their deposit account agreements.Your deposit account agreement may provide guidance on how you can contact the bank if you discover an error on your statement. Banks are generally permitted to make adjustments to correct any errors. For example, a bank that mistakenly gives you $50K may reverse the transaction and may give you notice of the clawback action.

Is There a Bank Error in Your Favor Law?

There may not be a specific bank error in your favor law, but you generally must return the funds if a bank accidentally gives you money. That’s because you have no right to spend, use, or withdraw any money you may receive from your bank in error. As mentioned above, banks are generally permitted to make adjustments to correct any errors.What happens if a bank accidentally gives you money is it may discover the mistake and attempt a reversal of the transaction. This can result in an overdraft or negative balance if you withdraw or spend the accidental funds before the bank discovers the error. The bank may attempt to recover the money through other means, such as contacting law enforcement and filing a police report.You don’t have a right to spend money that doesn’t belong to you. If the bank gives you money by accident, the bank under existing laws may pursue and demand full reimbursement of the accidental transaction as a matter of unjust enrichment.

What to Do If You Receive a Bank Error in Your Favor

If you receive a bank error in your favor:

Do Not Spend the Money

Spending money that doesn’t belong to you is never a good idea. You’re not responsible for a bank’s mistakes, but you could be held responsible if you receive bank funds in error and fail to return the liquid assets. Such a bank error is not your typical direct deposit transaction.Banks are typically required to report deposits over $10,000 to the IRS, but this may not apply if a bank gives you more than $10K by accident.

Contacting Your Bank

In addition to not spending the money, you may want to contact your bank if you discover a bank error in your favor. You can call your bank’s customer service phone number to report the mistake.You may find your bank account number in your personal checkbook or mobile banking app if the bank asks you to provide your account number for verification purposes.

Monitoring Your Bank Account

Whether you have a traditional bank account or an online savings account, monitoring your bank account is always a good idea. If a bank accidentally gives you money, you can monitor your account to see if and when the bank reverses the erroneous transaction.You can transfer money from bank to bank at any time, but you may want to minimize your bank account activity until resolving any bank errors affecting your account.

The Takeaway

A bank error that gives you money by mistake is not really in your favor. That’s because you don’t have a right to keep that money, so allowing your bank to recover the funds may be your best course of action.If you’re looking to earn interest on your savings, Lantern by SoFi can help. Our online banking marketplace makes it easy to compare annual percentage yields and choose a bank account that’s right for you.Compare today’s high-yield savings rates including fees and balance minimums.

Frequently Asked Questions

How many days does the bank have to investigate the error?
What is considered a bank error?
What is the statute of limitations for bank error in your favor?
Photo credit: iStock/GaudiLab

About the Author

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and served as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.
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