Chase Money Glitch: What Happens When Banks Spot Unauthorized Credits?

Unexpected credits appearing in a bank account can be confusing and even tempting to spend. Reports of a “Chase money glitch” have raised questions about how banks handle such errors and what customers should do if they notice extra funds.

Banks have strict policies regarding unauthorized deposits, and mistakenly received money is not free to keep. Understanding these discrepancies helps account holders avoid financial and legal consequences.

Transaction Discrepancies

Banks process millions of transactions daily, and while their systems are designed for accuracy, errors still happen. These discrepancies can result from technical malfunctions, human mistakes, or fraudulent activity. Unexpected credits often stem from misapplied deposits, duplicate transactions, or system errors that temporarily inflate balances. Financial institutions use automated monitoring tools to flag and correct mistakes quickly.

One common cause is batch processing errors, where multiple transactions are settled at once. A glitch in this process can lead to duplicate credits or incorrect postings. In 2021, Citibank mistakenly wired $900 million to creditors due to a processing error, demonstrating that even major financial institutions are susceptible to such mistakes. While most errors involve smaller amounts, banks have reconciliation procedures to detect and fix them—often before customers even notice.

Regulations dictate how banks handle these errors. Under the Electronic Fund Transfer Act (EFTA), financial institutions must investigate reported discrepancies within 10 business days and correct any unauthorized or incorrect transactions. If more time is needed, a provisional credit may be issued while the investigation continues.

Banking Agreements and Unauthorized Credits

When opening an account, customers agree to terms that outline their rights and responsibilities, including how unexpected credits are handled. These agreements specify that mistakenly deposited funds do not belong to the recipient and must be reported. Banks retain the right to correct errors without prior notice.

If an erroneous credit is spent before the bank reclaims it, the account may become overdrawn, leading to fees or a negative balance. Some banks may initiate collection efforts if the funds are not voluntarily returned.

Large or unusual deposits can also trigger fraud prevention measures. Banks monitor irregular activity, and if the source of the funds is unclear, they may freeze the account or require verification. In some cases, institutions file Suspicious Activity Reports (SARs) with regulatory agencies, leading to further scrutiny.

Bank and Customer Obligations

Banks are responsible for maintaining accurate records, identifying discrepancies, notifying customers, and complying with regulations. Consumer protection laws, such as the Truth in Savings Act (TISA), require transparency in account terms, including how errors are handled.

Customers are expected to monitor their accounts and report irregularities. Most banks provide online and mobile tools for real-time tracking. Ignoring unexpected deposits can lead to unintended consequences, especially if the funds are later reclaimed. Spending money that does not belong to the account holder can result in financial penalties and legal consequences.

If a customer disputes an adjustment, they have the right to request a detailed explanation and supporting documentation. Banks must provide a breakdown of the transaction history and any corrections applied. If a resolution cannot be reached, customers can escalate concerns to regulatory bodies such as the Consumer Financial Protection Bureau (CFPB) or the Office of the Comptroller of the Currency (OCC).

Reversal of Funds

When unauthorized credits are identified, banks initiate a reversal process to correct the account balance. This begins with an internal review to trace the origin of the funds and determine whether the deposit resulted from a processing error, misrouted transfer, or external mistake.

If the discrepancy involves an Automated Clearing House (ACH) transaction, banks follow National Automated Clearing House Association (NACHA) rules, which allow them to reverse erroneous credits within five banking days under specific conditions, such as duplicate payments or incorrect amounts.

Wire transfers are handled differently. Under Federal Reserve Regulation J, once a wire transfer is completed, it is generally final. However, if a bank identifies an error, it may attempt to retrieve the funds through a reversal request, though the recipient must voluntarily return them unless fraud or misrepresentation is involved. Check deposits that result in erroneous credits can be reversed if the check is returned unpaid due to insufficient funds or a stop-payment request.

Legal Aspects

Banks have the legal authority to reclaim mistakenly deposited funds, and failing to return unauthorized credits can lead to serious consequences. Customers who knowingly spend money that does not belong to them may face civil or criminal liability. In the United States, statutes such as 18 U.S. Code 1344 (bank fraud) and state-level theft laws can apply if an individual intentionally withholds or misuses funds deposited in error.

Legal action is more likely in cases involving large sums or when a customer refuses to cooperate with the bank’s recovery efforts. Courts have consistently ruled in favor of financial institutions, reinforcing that mistakenly received funds must be returned. In Citizens Bank of Pennsylvania v. Brophy, a customer who spent miscredited funds was ordered to repay the bank. Even if criminal charges are not pursued, banks can initiate civil lawsuits to recover losses, which may result in wage garnishments or asset seizures.

Regulatory agencies such as the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) oversee compliance, ensuring that banks follow proper procedures when rectifying errors.