NatWest faces probe, compensation claims over balance glitch

NatWest faces probe, compensation claims over balance glitch

Summary: After a software bug caused widespread payments chaos last week, RBS faces regulatory scrutiny and compensation claims from customers who incurred charges

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TOPICS: Security
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NatWest is facing compensation claims and a grilling by regulators after a software issue caused chaos for customers last week.

NatWest cashpoint

After a software bug caused widespread payments chaos last week, RBS faces regulatory scrutiny and compensation claims from customers who incurred charges. Image credit: RBS

The IT problem began late last Tuesday, when customers' balances failed to update correctly, making it impossible for many customers of NatWest, Ulster Bank and parent company RBS to access their accounts online or through ATMs, and stopping direct debits and standing orders from processing. 

With the dust now settling, NatWest will have to supply the Financial Services Authority (FSA) with a report into the exact causes of the software failure and how it plans to avoid such a problem in the future. "We will expect the firm to provide us with a complete account of this issue, and to put in place the necessary steps to ensure the risks of this problem are addressed," said a spokeswoman for the regulator. "The focus, from our point of view, is how [RBS] treats its customers."

Banks have an obligation to process payments promptly, including having the necessary IT systems in place, and disaster recovery procedures, according to banking regulations.

"There's a requirement that firms have the appropriate systems and controls in place," a spokesman for the FSA told ZDNet on Monday. "That is partly in terms of managing [processes] rather than IT systems, but clearly that encompasses a wide variety of things. It means, for example, that you can't outsource responsibility for ensuring that the system works properly."

The FSA can fine regulated firms on a case-by-case basis, said the spokesman, but said it would be "premature" to comment further.

RBS said it was investigating the root cause of the software problem on Monday, but denied reports that the problem had been caused or exacerbated by outsourcing. RBS outsources some of its business function to India. "It was not a problem in India or anything to do with outsourcing," an RBS spokeswoman told ZDNet UK, adding that the glitch was discovered in an IT centre in the UK, and fixed in Edinburgh.

RBS has been working with the FSA throughout the payments processing outage, but at present is focusing on getting its systems back up and running, rather than the FSA probe, according to the spokeswoman.

"Our priority is to get through the backlog. We'll deal with the rest [of the issues] when we have [dealt with the backlog]," she said.

Compensation

Among the issues that RBS will likely face is the question of compensation to its customers. "If a bank doesn't make a payment or is late, then it is liable to customers for any charge for which the customer is liable," the FSA spokesman said. "It's not limited to interest and charges imposed by the bank which has had problems, but also includes any charges or interest made payable to anyone else as a result of missed or late payment."

While RBS and its subsidiaries have an obligation to compensate any customers who were affected by the delayed payments processing under Payments Services Regulations 75, 76 and 77, it has discretion in compensating customers, with the level decided on an individual, case-by-case basis.

The FSA leaves it up to banks to decide the level and extent of compensation in each individual case, said the spokesman, and individuals affected by the RBS payments delays must go to the bank or its subsidiaries to ask for compensation.

RBS said it would compensate customers for any charges incurred due to late payments in an FAQ on Monday.

"There has been an impact to payments, and some payments due to be processed over the past few days may have been delayed," RBS said. "This will impact bill payments due to third parties, for example your credit card or electricity bill. We are working to ensure these payments are processed as priority and will ensure any fees or charges incurred by customers will be fully refunded."

Topic: Security

Tom Espiner

About Tom Espiner

Tom is a technology reporter for ZDNet.com. He covers the security beat, writing about everything from hacking and cybercrime to threats and mitigation. He also focuses on open source and emerging technologies, all the while trying to cut through greenwash.

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  • It seems likely that the problems (for Natwest at least) began when they started to split the accounts that will be taken over by Santander. There have been problems for weeks with transfers between Natwest and Natwest/Santander accounts. They even updated the mobile phone app recently because there was a problem with that as well. They have recently updated their online banking websites as well. I think this is no small coincidence.
    anonymous