iTnews

RACV 'system error' empties bank accounts, credit cards

By Ry Crozier , Julian Bajkowski on Nov 14, 2018 7:00AM
RACV 'system error' empties bank accounts, credit cards

No resolution after direct debits go feral.

Insurer RACV has blamed a “system error” for causing the company to repeatedly direct debit customers, maxing out their credit cards and draining their bank accounts sometimes to the tune of tens of thousands of dollars.

Angry customers hit social media and the airwaves complaining in some cases that a single payment had been taken out hundreds of times within hours.

This is a developing story. Click here to find out more about the current situation and what went wrong.

While the number of people affected by the incident so far appears relatively limited (at least compared to a major bank outage), the sheer scale of repeated deductions is unusual in terms of the high cumulative values deducted.

Repercussions for affected customers have been severe. Many have been left without access to funds, mortgage and loan payments have been missed, accounts overdrawn and credit cards erroneously booked up to the max.

On Wednesday morning many customers said they had still not received refunds for very large deducted sums and RACV had still not updated its public statements on the incident.

While the cash guzzling malfunction was publicly acknowledged by RACV on Tuesday afternoon  in a brief statement, the insurer did not return calls from iTnews.

The incident appears to have started on Monday night.

“Last night a system error caused a select number of RACV members to experience a direct debit issue,” the company said on Tuesday.

“We are working to fix this and reverse all incorrect transactions as quickly as possible.”

"Select" policy holders are understandably ropeable.

Banks and the payments industry are understood to be privately furious at RACV management over its incident response management and the negative effect on already bruised institutional reputations in the wake of the Royal Commission into bank misbehaviour.

Banks will also have to mop up the mess caused by financial distress flags being tripped on many accounts.

A RACV customer who contacted iTnews said more than $50,000 had been "drained" from their account and requests to Westpac to freeze their account had not worked.

"This whole thing is a joke," the customer said.

Another customer on Tuesday told 3AW that RACV took $21,000 from his bank account, repeating a direct debit for car insurance over and over.

Things got worse on RACV's Facebook page, where a customer complained they had been “charged 188 times and had been left with no money in my account”, while another said 50 transactions had drained their account.

"Can I have my $30,000 back please? My staff haven't been able to process orders today and it's caused major business interruption having a maxed out credit card!" another angry customer post said.

Another customer told The New Daily that 95 payments were taken from his account, totalling $7900.

Bank executives contacted by iTnews squarely laid the blame at the feet of RACV. 

It was suggested the most likely cause was a batching error that would be reversed out.

One bank source, who spoke on condition of anonymity, questioned why RACV's transaction monitoring had not picked up the anomalous repeated transactions and quarantined them.

A failure to detect such transaction behaviour did not bode well for RACV's cyber readiness, the source suggested.

The high-profile batch-based incident will increase pressure institutions, especially banks acting as merchant acquirers, to shift the the New Payments Platform (NPP) that in the near future will allow billing customers to authorise individual transactions.

A specific feature of the NPP's architecture is that so-called 'pull' payments that move without customers' specific authorisation have been designed out of the system so that payment while automatic requests can be made, the still need approval. 

In the mean time, customers are counting the damage done by the bad batch run.

Although the erroneous deductions must ultimately be refunded quickly, RACV is yet to clarify what if any compensation will be offered for business disruption or personal losses - think missed repayments or bounced cheques - incurred by customers.

"Thanks RACV it’s the first time in 20 years we missed a mortgage payment since you drained our account," said an angrily impecunious poster on Facebook on Tuesday night.

"...send me a paper bill I’m happy to pay the extra $2 for the inconvenience I will forgo the 7 eleven coffee once or twice a month instead of forfeiting on my mortgage."

Got a news tip for our journalists? Share it with us anonymously here.
Copyright © iTnews.com.au . All rights reserved.
Tags:
accounts direct debit drain finance financeit glitch racv

Partner Content

Nestlé subsidiary sees sweet returns from data-driven transformation
Partner Content Nestlé subsidiary sees sweet returns from data-driven transformation
Beat the DDoS blackmails in 2021
Promoted Content Beat the DDoS blackmails in 2021
Setting a path to self-funded mainframe-to-cloud modernisation with Micro Focus
Promoted Content Setting a path to self-funded mainframe-to-cloud modernisation with Micro Focus
As Australian companies lean more heavily on the cloud, edge security is finding its stride
Partner Content As Australian companies lean more heavily on the cloud, edge security is finding its stride

Sponsored Whitepapers

Is the technology refresh dead?
Is the technology refresh dead?
DevSecOps: A framework for digital innovation
DevSecOps: A framework for digital innovation
Encryption: Protect your most critical data
Encryption: Protect your most critical data
Overcoming data security challenges in a hybrid, multicloud world
Overcoming data security challenges in a hybrid, multicloud world
Move beyond passwords
Move beyond passwords

Events

  • On-Demand Webinar: How Poly and Microsoft are Embracing Future Work Environments
  • [Webinar] - Transformation versus compliance – a guide for CXOs
  • Masters of Microsoft Licensing
By Ry Crozier
Julian Bajkowski
Nov 14 2018
7:00AM
0 Comments

Related Articles

  • Prosecutors arrest three in suspected Wirecard criminal racket
  • Judo Bank lands Wells Fargo innovation chief
  • NAB's enterprise technology executive quietly moves on
  • BNPL provider Openpay appoints new CIO
Share on Twitter Share on Facebook Share on LinkedIn Share on Whatsapp Email A Friend

Most Read Articles

Vodafone hit by nationwide 4G outage

Vodafone hit by nationwide 4G outage

NAB's chief data officer Glenda Crisp leaves bank

NAB's chief data officer Glenda Crisp leaves bank

Westpac to offer smartphone-based identity verification group-wide

Westpac to offer smartphone-based identity verification group-wide

TPG, Optus, Nokia to shape national emergency mobile broadband network

TPG, Optus, Nokia to shape national emergency mobile broadband network

You must be a registered member of iTnews to post a comment.
Log In | Register
All rights reserved. This material may not be published, broadcast, rewritten or redistributed in any form without prior authorisation.
Your use of this website constitutes acceptance of nextmedia's Privacy Policy and Terms & Conditions.