Don’t rely on an SMS “from a bank” as proof of payment to release goods you are selling to a buyer. Release the goods only after making sure that the transaction has been honoured by your bank and the money has been deposited into your bank account.
This was the tough lesson learnt by Mr R, as reported in the most recent Ombudsman’s Briefcase newsletter by the Ombudsman for Short-term Insurance, Deanne Wood.
Mr R advertised his car for sale, only to have it stolen from him. And he failed in his attempt to obtain compensation from his insurer.
Mr R advertised the car on a classified ads website. He was contacted by a potential buyer, and the two parties proceeded with the necessary paperwork to transfer ownership.
When Mr R received what appeared to be a bank-generated SMS indicating that the agreed purchase amount had been paid into his account, he released the vehicle to the buyer. But when he called the bank to find out why the transaction (an electronic funds transfer, or EFT), did not reflect in his account, he was told that EFT transactions can take up to three days to clear. Needless to say, Mr R never received the money.
Mr R claimed against his car insurance policy, which was held with Outsurance. Outsurance rejected the claim on the basis that its terms and conditions were very clear on such a loss: cover was excluded for any loss arising directly or indirectly from selling the insured item, and, more specifically, in circumstances where the policyholder released the insured item without prior confirmation from his or her bank that a valid payment had been made.
The ombudsman upheld the insurer’s rejection of the claim. In the newsletter, she points out: “An SMS from the bank is not irrefutable transactional proof of activity on a bank account. In fact, to ensure that its users are informed and aware of the various scams that are out there, some [classified advertisement] websites offer precautionary advice. One scam highlighted by these sites is the use of a commercial SMS messaging service to send the seller an apparently legitimate confirmation that money has been deposited into his or her bank account. This SMS is a convincing replica of the ones a bank might send. Sellers are therefore advised not to release their goods until the deposit has actually been reflected in their bank account.”