TIL Citibank accidentally sent $900 million to lenders of the makeup company Revlon. It’s a unwritten rule that mistaken payments are sent back. And that’s what everyone thought would happen — except the lenders wouldn’t do it. And then a surprising court ruling said that the lenders could keep it

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If I’m not mistaken, the key thing here was that the companies who “mistakenly” recurved the transfers were owed that money. Is like if you go to make a payment in your credit card and fatfinger an extra zero. You owe the bank that money. You paid a debt. There’s a difference between that and discovering you got someone else’s check in the mail.


The title is misleading. If the bank sends you money that’s not yours, that you are not entitled to, you have to give it back. It’s a clerical error. You have no legal claim to the money. That hasn’t changed. In this case, the bank sent back the principal of a loan to the lender, instead of just an interest payment. The lender is perfectly within their rights to assume that this was repayment, as allowed by the terms of the loan agreement.


There was a rule that addressed those issues way back when Poland was communist. I was a university student there, and I got a very, very nice scholarship – totalling just above the country’s average wages. And yes, the education itself was free too. At the end of the first year, the registrar sent me a letter saying that, by mistake, they had been paying me twice the amount they were supposed to so would I, please return the difference. I told my mom about it. She was a librarian and an avid reader of the country’s official legal journal. She was like a lawyer without the license. Just a hobby. Turned out that if the government made an error to your advantage you got to keep the loot. Mom gave me the paragraph numbers and all the relevant info, which I presented to the registrar. No money for them.


One other variable here. Between the time that the loan was initiated and the accidental full payment, Revlon’s credit rating basically tanked. The creditors may not have ever seen the money they were owed if they returned the accidental payoff. Citi made a serious error in judgement when it came to software usability (and arguably in outsourcing clerical work to less skilled international labor) and now they’re left holding the bag. I understand why it happened but I cannot bring myself to feel sorry for them.


The title skips some very important points. First, Citibank was the bank responsible for making payments on behalf of Revlon to these lenders. So it had been sending the usual loan payments to these lenders; it’s just that on this occasion it sent the entire balance amount. That’s like me paying off my mortgage in advance. You can’t blame the lenders for assuming it was a loan payoff. Thus, given the shitty financial situation Revlon was in, the lenders were all too happy to take the money and walk away!