Bank drafts are seen as a safe way to transfer funds, particularly in house purchases, but many users are unaware that they will be held liable for drafts lost in the post - even if they have not signed for them.

One couple - whose bank sent a bank draft for their mortgage to their solicitors by Swiftpost - are currently being held liable for the loss of the draft - worth €1.3 million - despite being neither the sender nor the receiver of the draft.

The couple, who are customers of Ulster Bank, were asked to sign an indemnity form holding them responsible if the original draft is cashed by another party.

This is standard practice in the industry in cases of lost drafts, however, the couple argue it would be impossible for any consumer to know this.

The couple, who do not wish to be named, eventually signed the indemnity because they had used their savings to pay for a deposit for the property, which they would lose if they did not complete the sale.

They have since taken a complaint to the Ombudsman for Credit Institutions and written to the Irish Financial Services Regulatory Authority (IFSRA) giving an outline of their case.

Ulster Bank sent the bank draft by Swiftpost to the couple's solicitors, to whom it was made payable, but it was lost somewhere in between the sorting office and the solicitors' offices.

The couple say they asked for the sum of money to be sent by electronic transfer, but were told this was not possible as the particular business centre did not have the facility. According to the solicitors, the bank says it sent the draft by Swiftpost on the instruction of the couple and that the couple are therefore responsible for the loss.

No condition in the loan agreement or any other document signed by the couple set out what would happen in the event the draft was lost. As a result, the couple was unaware that any risk would fall to them if the bank posted the draft by Swiftpost.

The bank put a stop on the draft, but it is still possible for someone other than the couple's solicitors to cash it, for example if someone fraudulently set up an account in the name of the solicitors' firm.

The bank has internal controls to prevent this happening, but insisted that the couple sign an indemnity for the value of the draft before they re-issued a duplicate.

"It's an impossible situation to be in," one half of the couple told The Irish Times. "The banks refuse to rely on their own internal controls. If they themselves cash the draft, despite the fact it has been cancelled, we are held liable and will have to pay back twice the value of the mortgage."

The property the couple purchased is being used as their pension investment. The couple used €700,000 of their own savings and the €1.3 million mortgage to buy the €2 million property and plan to pay back the mortgage over 20 years using rental income. The rental income from the property will then be used to provide a pension.

However, if the draft is cashed, the couple will owe Ulster Bank twice the value of the mortgage and will have to pass ownership of the property to the bank, leaving them without their pension.

A statement from Ulster Bank indicated it could not discuss individual cases, as it regards all dealings with clients as strictly confidential.

"In general terms, in the transfer of large amounts, Ulster Bank prefers the security of electronic transfer. However, we will transfer the money for clients in any format they require including registered post," it continued.

"It is common practice in the banking fraternity for customers to sign an indemnity in the event a draft goes missing," the bank added.

This case follows the recently publicised story of Laurence and Annette Power, a couple based in Ipswich in the UK whose bank draft for €417,000 was lost by Parcelforce, a subsidiary of Royal Mail.

In this case, Mr Power had been the sender of the bank draft, posting the proceeds from the sale of a Dublin house from Ipswich to their solicitor in Dublin in order for the solicitor to lodge it to his Irish account.

AIB, the bank that issued the draft, bought the house the Powers were planning to buy in Ipswich, but retained the deeds, again failing to rely on its own security checks for the cashing of bank drafts. It refuses to issue the balance from the sale of the house in Dublin, some £105,000 (€152,000) until the lost draft expires in six years.

A spokeswoman for IFSRA said the financial regulator could not comment on specific cases, but that banks must inform consumers of the risks of using bank drafts.

"The financial regulator would feel it is incumbent upon the financial institutions that they are upfront with customers and make customers fully aware of the status of these instruments. They are being treated like cash," said the spokeswoman.