Damaged or counterfeit money: What to do

twenty pound notes

"THE money I've been given is seriously damaged and I suspect some of it is counterfeit. What are my rights?"

There's nothing worse than putting a pair of jeans in a heavy wash only to remember there's a £20 note in one of the pockets.

Except, maybe, going to pay for something and being informed that the note you've just handed over is worthless.

While there's hope for those who've mangled their cash, the news is far less bright for those who suspect they've come into possession of counterfeit notes.

Read on to find out about the former, or skip ahead to see what should be done with counterfeit money - or if you come into possession of genuine notes that are no longer legal tender.

The dog ate it

Lots of us have used somewhat torn or dog eared notes to pay for a round of drinks or the weekend paper, and some of us will even have handled notes that have been sticky taped back together.

But getting out the sticky tape relies on having both parts of the note to hand - not always possible if they've been half eaten by the family pet, or mangled by the washing machine.

Once they've wrestled what's left of the notes back from the dog, owners of seriously damaged notes are reliant on the Bank of England's Mutilated Note service for reimbursement.

They deal with around 23,000 applications, totalling claims of £11 million, every year; most cases are dealt with in just a couple of days.

They request that all applicants download and complete an application form [pdf], which they should then send, with the remainder of the notes, to the Bank's offices in Leeds.

Applications in person aren't generally accepted. If posting the remnants isn't possible for some reason - they're too fragile or contaminated with something it's not permissible to send through the post - it's recommended that the applicant contact the Leeds office to find out how best to proceed.

Those filling in the form will need to provide the serial numbers of the notes that have been damaged, but also provide as much detail of what happened to the note, and where the rest of it is, as they can.

That's because the Bank doesn't want to pay out on the same note more than once. They say that "as a general rule, there should be physical evidence of at least half a banknote before payment can be made".

If this isn't the case, the explanation of what's happened to the larger part of the note could make all the difference between getting a refund or not; the Bank needs to be convinced that the rest of the note isn't salvageable.

Anyone feeling sheepish that they have to explain how the majority of that once crisp £20 ended up inside their dog's stomach should take heart: the Bank also issues audit-based guidance for the "limited cases" in which there are little to no physical banknotes left to assess.

Counterfeit currency

It's been a game of cat and mouse between forgers and issuers ever since the dawn of money - think of all those images of people biting gold coins to check they're real.

That's because whoever ends up with the counterfeit money is the one who loses out.

Retailers are within their rights to confiscate fake notes in order to pass them on to the police - although if a customer is given a note they suspect of being fake, they are equally entitled to refuse to accept it and be paid with a different note.

It's worth the hassle, because once that note is in your possession, you've no right to get it replaced with genuine currency.

So what if you've received a counterfeit note from a cash machine? Notes are supposed to be carefully checked before they're put into the machines, but anyone who suspects they've been issued with a dodgy note should report it immediately.

That means going into the bank or store where the cash machine is located and telling the staff. Having proof of the transaction will make getting a genuine note to replace the fraudulent one easier.

So if the note looks dodgy, don't put it away with the others. If the cash machine is inside a shop or bank, keep the dispensed notes in view and raise the issue straight away.

If that's not possible, there should be contact details for the owner of the ATM on the machine itself - so get in touch as soon as possible with as much detail about the transaction as you can.

Should you be able to prove the fake note came from that machine, you should reasonably expect to be reimbursed.

But what if we don't spot the fake note until later?

All notes suspected of being counterfeit should be taken to the police. They'll issue the holder with a receipt before sending the suspect notes to the Bank of England for analysis.

If the notes do turn out to be genuine, the holder will be fully reimbursed - but if not, tough.

And under the Forgeries and Counterfeit Act 1981, anyone who thinks they might have a forged note who tries to pass it on is committing an offence - so the onus really is on us not to accept anything suspicious in the first place.

Getting to know the money we handle is the safest bet. The Bank of England issue a leaflet [pdf] and an app for iOS and Android users, explaining what to look for.

They're old money, you know

There's one more issue we should cover here - old, no longer accepted, notes.

For most of us, spending the older tenners and £20s before they're withdrawn isn't that much of an issue - but some people do hoard their notes rather than banking them.

So what do we do if we find the notes we've got are genuine but no longer legal tender?

The Bank of England are obliged to give at least a month's notice before a note loses its legal tender status; in 2014 when they decided to withdraw the Houblon £50 banknote, they gave three months' notice.

From May 1 2014 anyone trying to use one to pay for something should have been told it wasn't possible - but most banks and building societies would swap them for the newer note or different denominations until the end of October that year.

Changing money
Polymer banknotes: due in 2016

As the £50 note isn't exactly the most commonly used piece of currency, many people aren't all that aware of what the accepted version looks like.

Anyone who finds they've got a note featuring Sir John Houblon on his own, rather than the double act of entrepreneur Matthew Boulton and engineer James Watt shouldn't despair though.

The Bank of England guarantee that genuine notes will retain their face value for all time - and while high street banks are under no obligation to honour them, the Bank of England will.

They accept old notes in person at their headquarters in Threadneedle Street, London, or by post; they advise those thinking of posting their old money that this is at their risk, and "therefore recommend that appropriate measures are taken to insure against loss or theft".

Again there's a form to fill in [pdf], and anyone who has more than £1,000 in old notes must also send copies of photographic ID and proof of their address.

Those swapping £50 or less will be reimbursed with cash, or via BACS transfer to their bank account if so requested; exchanges of more than £50 will always be transferred electronically.

There's more information, including a list of acceptable proofs of ID and address, on the Bank of England's website here.

Holders of banknotes issued by the three Scottish banks and four Northern Irish banks authorised to issue them should have similar protection - but it's worth contacting the Association of Commercial Banknote Issuers, whose details are here.

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