Overview

Erroneous loan disbursements—where funds are sent to a bank account other than the intended recipient’s—are increasingly common with electronic transfers (PESONet, InstaPay, internal bank transfers, and e-wallet credits). This article explains who is liable, what remedies exist, and how to manage risk under Philippine law and practice. It synthesizes principles from the Civil Code on obligations and quasi-contracts, the Financial Products and Services Consumer Protection Act, the E-Commerce Act, data-privacy rules, and standard banking/payment-system procedures.

Legal Foundations

Civil Code: Obligations & Contracts
- Solutio indebiti (payment by mistake): A person who receives something by mistake is obliged to return it. This quasi-contractual doctrine squarely covers funds credited to a wrong account.
- Unjust Enrichment (Art. 22): No one should unjustly enrich themselves at another’s expense. An unintended recipient cannot keep funds with no legal basis.
- Abuse of rights (Arts. 19–21): Parties must act with justice, give everyone their due, and observe honesty and good faith. This frames standards of conduct for banks and recipients once an error is known.
Prescription (Statutes of Limitation)
- Quasi-contracts (e.g., solutio indebiti): 6 years from discovery or accrual of the cause.
- Written contracts (e.g., lender vs. its bank under account agreements): 10 years.
- Quasi-delicts (negligence causing damage): 4 years. Plaintiffs often plead in the alternative (contract and quasi-contract) to preserve longer prescriptive periods.
Financial Consumer Protection
- Republic Act No. 11765 (2022) empowers regulators to require fair handling of complaints, error-resolution processes, and redress mechanisms. It supports a consumer’s right to dispute and a financial institution’s duty to resolve.
E-Commerce & Electronic Evidence
- RA 8792 recognizes the legal effect of electronic data messages and signatures. Transfer logs, UTRs/reference numbers, audit trails, and screenshots are admissible if properly authenticated.
Data Privacy
- RA 10173 (Data Privacy Act) allows disclosure/processing of minimal necessary information for compliance with law, contracts, or legitimate interests (e.g., recovering misdirected funds). Banks must avoid over-disclosure and follow purpose limitation.
Criminal Law Touchpoints
- A recipient who knows the funds are not theirs and appropriates or refuses to return may be exposed to estafa (swindling) for misappropriation/conversion. Criminal liability hinges on intent and proof that the recipient knew of the mistake.

The Contractual Matrix and Typical Actors

Lender ↔ Borrower: Loan agreement (and disbursement instructions).
Originating Bank ↔ Lender: Deposit/treasury/cash-management agreement and payment-channel rules.
Intermediary/Transfer Network: PESONet/InstaPay rails with recall/return messaging standards.
Beneficiary Bank: Holds the erroneous credit.
Unintended Recipient: Account holder who received funds by mistake.

Each link has different duties; liability turns on where the error occurred and whether parties exercised ordinary diligence.

Liability by Scenario

1) Borrower gave wrong account details; lender followed exactly

Primary risk: Borrower. The lender fulfilled the disbursement per instructions and has no obligation to pay again if it acted with ordinary diligence.
However, lenders and banks should assist in recall/trace efforts in good faith. Refusal to help can attract regulatory scrutiny or liability if contrary to internal policies or consumer-protection duties.

2) Lender or its bank miscoded the transfer (borrower’s instructions were correct)

Primary liability: Lender and/or its originating bank, depending on who erred.
The borrower may demand the loan proceeds (or re-credit) from the lender; the lender in turn pursues recovery against its bank or the unintended recipient under solutio indebiti/unjust enrichment.

3) Beneficiary bank misposted to a wrong internal account

Primary liability: Beneficiary bank to reverse the erroneous credit and cooperate in returning funds.
Debiting the recipient’s account without consent is sensitive; banks typically:
- Place a hold while investigating,
- Request consent for reversal,
- Or act under contractual error-correction clauses/network rules with due process.

4) System/network error (cutover/duplication, name-number mismatch)

Loss is allocated by scheme rules, bilateral bank agreements, and fault. Absent customer fault, lenders should ensure the borrower is made whole and then seek inter-bank indemnities.

Duties After Discovery of Error

Prompt Notice & Freeze/Flag
- The discovering party (lender or bank) must immediately notify counterpart banks and the unintended recipient (through the bank) to flag the funds and prevent dissipation.
Recall / Return Messaging
- Banks send formal recall/return requests within scheme cut-offs. Compliance is faster for InstaPay (near-real time) but more complex once funds have been moved out (e.g., cash-out, e-wallet-to-wallet hops).
KYC-Bound Disclosures
- Banks typically cannot hand over the unintended recipient’s full identity without basis. They can:
  - Confirm receipt status,
  - Forward demand letters,
  - Provide minimal identifying details if required by lawful order, regulatory directive, or as necessary to prosecute or file a civil case.
Good-Faith Cooperation
- Financial institutions must maintain fair complaint handling, time-bound updates, and documentation for regulatory review and potential litigation.

Civil Remedies and Strategy

Against the Unintended Recipient

Cause of Action: Solutio indebiti and unjust enrichment (sum of money + legal interest).
Evidence: Transfer logs (UTR/reference), bank certifications, affidavit of the disbursing officer, reconciliation/audit reports, demand letters and proof of service.
Provisional Remedies: Preliminary attachment if there is a risk of concealment/dissipation; injunction to restrain withdrawal when circumstances warrant.
Venue: Where the plaintiff or defendant resides or where the cause of action arose; check jurisdictional amounts.
Small Claims: For money claims up to ₱1,000,000, small-claims procedure (no lawyers required) can be a fast lane.

Against Banks (when fault lies with them)

Contractual claims for breach of duty of care, processing errors, or failure to follow standing instructions.
Alternative tort theories (negligence) if extra-contractual duties were breached.
Relief: Re-credit of funds, consequential damages (if provable), and interest.

Interest and Damages

Legal interest generally accrues from judicial or extra-judicial demand.
Actual damages require proof; moral/exemplary may be awarded for bad faith or oppressive conduct.
Attorney’s fees are not automatic; they follow specific Civil Code grounds.

Criminal Law Angle

Where the unintended recipient spends or refuses to return funds despite clear notice of error, the elements of estafa through misappropriation/conversion may be present. Practical notes:

Filing a criminal complaint can pressure return but should be grounded in evidence of knowledge and intent.
Coordinating with law enforcement may also facilitate hold requests while a case is evaluated.

Payment-System Realities

Name vs. Account Number: In many rails, account number prevails; name verification is not dispositive. Mistypes that yield a valid account number often go straight-through.
Cut-offs & Finality: The earlier the recall, the higher the success rate. Once withdrawn or re-transferred, recovery becomes a civil/criminal enforcement problem rather than a pure operational fix.
E-wallets: Providers usually have error-correction policies and can temporarily lock funds pending review, but due process to the e-wallet holder still applies.

Practical Playbooks

If You Are the Borrower (you gave details to the lender)

Check your instructions (screenshots, emails, signed forms).
If your mistake, work with the lender to initiate recall and send demand to the recipient; expect to shoulder loss unless recovery succeeds.
If not your mistake, demand re-credit or proper disbursement from the lender and let the lender/bank chase the error downstream.
Preserve evidence and send a dated formal demand to stop the recipient from claiming good faith.

If You Are the Lender

Freeze internal processing for related transfers; notify banks immediately.
Issue recall messages and document all steps (timestamps matter).
If the borrower is blameless, consider making the borrower whole promptly and subrogating into recovery claims.
Escalate via the bank’s dispute channels and, if needed, the regulator’s consumer-assistance path.

If You Are the Unintended Recipient

Do not touch the funds except to return them; notify your bank.
Expect demands; returning promptly mitigates civil/criminal risk.
If you already moved the funds, coordinate to re-credit and avoid compounding liability.

Allocation of Loss: Quick Matrix

Where the error occurred	Who is typically liable initially	Borrower’s right to proceeds
Borrower supplied wrong account number	Borrower	Usually no (lender fulfilled per instruction)
Lender keyed/approved wrong account	Lender (and/or its bank)	Yes—borrower can demand proper disbursement
Beneficiary bank misposted	Beneficiary bank (to reverse)	Yes—borrower ultimately must receive funds
Network/system duplication	Allocated by scheme rules; party at fault bears	Yes—borrower entitled to one correct disbursement

(Parties may reallocate among themselves afterward via indemnity/subrogation.)

Evidence & Documentation Checklist

Disbursement instructions (forms, messages, signed undertakings).
Transfer details: date/time, amount, UTR/reference, channel (PESONet/InstaPay/internal).
Bank certifications on credit status and recall attempts.
Audit trail/screenshots of encoding and approvals (maker-checker).
Demand letters and proof of service/receipt.
Affidavits of personnel and system logs (with hash values where available).

Drafting & Operational Controls

For lenders and corporates:

Include account-validation steps (test credit “penny drop,” name-match prompts).
Use maker–checker and dual-control for high-value disbursements.
Embed error-correction clauses and borrower representations on accuracy of beneficiary details.
Maintain playbooks for recalls, including 24/7 contacts at partner banks/e-wallets.

For borrowers:

Provide typed account details; avoid handwritten errors.
Ask lenders to confirm account name & number back to you before release.
Prefer channels offering name/number verification prompts.

Regulatory & Complaint Pathways

Start with the bank/FI’s internal complaint unit; keep ticket numbers and written updates.
If unresolved, escalate to the regulator’s consumer assistance mechanism with supporting documents.
Consider mediation or small-claims for straightforward recovery from recipients.

Frequently Asked Questions

1) Can a bank just pull back the money from the unintended recipient’s account? Not automatically. Banks typically need consent, a contractual error-reversal clause, or a lawful order. They may place a temporary hold during investigation.

2) If the unintended recipient already withdrew the funds, is recovery impossible? No. You can sue for sum of money based on solutio indebiti/unjust enrichment, seek attachment, and—where facts justify—pursue criminal action.

3) Does a mismatch between account name and number block the transfer? Often no; the account number controls. That’s why validation controls on the sender side are critical.

4) Who bears bank fees caused by the mistake? Fees connected with recall and recovery usually follow fault. If the borrower erred, expect to shoulder them; if the lender/bank erred, they typically absorb them.

Key Takeaways

Speed is everything: Immediate recall attempts and holds dramatically increase recovery odds.
Fault determines initial liability, but quasi-contract and unjust enrichment ensure that the ultimate loss rests with the party who caused or retains funds without basis.
Document relentlessly: timestamps, logs, and formal demands drive outcomes.
Design for prevention: maker-checker, validation prompts, and clear contract clauses prevent expensive recoveries later.

Model Notice/Demand (Short Form)

Subject: Erroneous Credit and Demand for Return To: [Unintended Recipient], through [Beneficiary Bank]

On [date], the amount of ₱[amount] was credited to your account [last 4 digits] by mistake. You have no legal basis to retain these funds.

Pursuant to solutio indebiti and the prohibition against unjust enrichment, you are hereby demanded to return the full amount within [3] business days from receipt of this notice, plus applicable legal interest.

Absent compliance, we will pursue civil and appropriate criminal remedies, and seek attachment and recovery of costs and fees.

Please coordinate with [bank contact] for the immediate reversal/return.

[Name/Position] [Company] [Contact details]

Final Word

In Philippine practice, mistaken loan disbursements are resolved fastest when parties cooperate under clear procedures, but the law provides robust backstops—civil, regulatory, and criminal—so that money paid by mistake does not stay with those who have no right to it. Designing for prevention, and acting decisively when mistakes happen, is the best risk strategy.