Big Blunder at Halifax Bank of Scotland

Stephanie McLaughlin, 22, just wanted her latest bank statement from Halifax Bank of Scotland (HBOS). What she got was a special delivery of 75,000 statements belonging to other bank customers.

Ms. McLaughlin was shocked when several large postal packages arrived at her door with the private financial details of her fellow bankers.

Halifax Bank of Scotland is the UK's largest mortgage and savings provider. It is a major economic player in new accounts and credit card accounts throughout the isles.

A merger of Halifax and Bank of Scotland in September 2001 led to the formation of Halifax Bank of Scotland and a total customer base of over 22 million people.

The customers whose privacy was violated compose just one third of one percent of the bank's overall clients. However, the unexpected exposure of private financial information has alarmed those affected.

The Halifax Bank of Scotland has issued a public apology. In an official statement the bank said "We are treating this matter very seriously and are investigating in full. This is a very specific, isolated incident and we will take steps to ensure there is no security issue for customers as a result of this matter. We apologize for any concern this has caused customers."

Many banks throughout the UK have specific language in their transaction and client service contracts that protect them from legal responsibility for errors that occur during transactions or account servicing.

In the past several years bank blunders have plagued the UK and Ireland, perhaps a result of currency differences (UK uses GBP while the rest of the EU has converted to euros) or the rapid rate of mergers in the region's banking industry.

In another large blunder by the Bank of Ireland in 2001, the bank's "error protection" clause backfired.

A Dublin man named David Hickey was preparing to move to Spain and asked the bank to exchange 1,500 into Spanish currency. Instead of 300,000 Spanish pesetas, Mr. Hickey received 300,000 euros - the equivalent of nearly250,000.

The bank sent an official to retrieve the cash and Mr. Hickey was arrested and brought before a court.

Mr. Hickey's receipt from the bank's a disclaimer notice said the bank was not responsible for any errors made during the transaction. The customer refused to return the money, the bank refused to discuss the case and the police said because it was a technical error it was not a criminal matter.

Two years earlier in 1999, the Bank of Ireland admitted that up to 7,000 customers in the UK had been double charged for credit card purchases. They were not necessarily purchases made using Bank of Ireland cards, but by retail transactions at shops that use the Bank of Ireland's credit card services.

The Bank of Ireland said the mistake was a technical error and an unusual occurrence amid the 20 million plus credit card transactions processed through the institution annually.

In 2006, Bank of Ireland cash machines in Belfast paid out double the money requested by customers. As news of the technical default spread, lines formed at the bank machines.

Many of those looking to capitalize on the bank's error argued the "rip-off" reputation of banks to justify taking the "free money". In some instances in the UK, a 5 overdraft can result in bank fees and interest up to 100.

A Catholic priest in Belfast, Father Martin Magill, spoke to the BBC about the incidents citing the seventh Commandment, Thou shall not steal, and appealed to the moral conscience of the mishap participants. Nonetheless, the bank incurred a loss from the citywide mistake.

The Halifax Bank of Scotland account statement incident is not the first blemish on its reputation. Its postal banking service came under scrutiny in 2005.

Customers using the bank's service, through the Royal Mail Special Delivery system, were exposed to serious fraud without compensation. In some instances, business owners were left with up to 26,000 (about $50,000 USD) unaccounted for.

The bank's Direct Business Cheque account customers claims were rejected by the Halifax Bank of Scotland who stated that liability rested with Royal Mail who in turn refused to honor the claims.

The latest blunder by the Halifax Bank of Scotland perpetuates the public's growing distrust of the region's banking industry.

In response to the widespread problems the UK's Independent Banking Advisory Service (IBAS) was formed to mediate the growing conflicts between institutions and customers with ongoing disdain for poor service, high fees and frequent security breaches.

Sources:

"Woman gets 75,000 bank statements" BBC News, January 29, 2007.

Independent Banking Advisory Service website www.ibas.co.uk January 29, 2007.

"Thou must give that cash back" BBC News, May 26, 2006.

"Do we want machines to look after our money?" Andy Collier, The Scotsman, November 6, 2004.

"Bank apologizes for credit card error" BBC News, September 28, 1999.

"Man defiant after bank blunder" BBC News, November 21, 2001.