Share dealing: Systems issues at TD Waterhouse

When a client of TD Waterhouse's UK office wants to credit his trading account, this can be done only by debit card issued on an account with a UK bank.

The system uses the "Verified by Visa" system to ensure customer security.

But, if there is a problem with the card information provided, as one of the company's clients found out today, the TD Waterhouse system reports "we have been unable to validate your card details. Please check that the information you have provided is correct..."

This response is shown after the verification by Visa process is completed.

The client checked the information, noted that the address pre-loaded by the system was not in the order that the information was held by the bank (the postcode was in the wrong place) and corrected it. And then went through the transaction process again, again using the Verified by Visa system. The same message was displayed.

Again, the information was checked, ordered according to in the layout of the on-screen form, and the process repeated. Again, the same message appeared.

Puzzled, the client phoned his bank's fraud office, assuming that his card was blocked. But it turned out that, despite the message, each of the three transactions had been approved and authorisation codes issued. The bank's fraud office explained that once the authorisation codes are issued, there is no mechanism to cancel the transaction. That, the bank explained, has to be done by the merchant who uses those authorisation codes to either cancel or refund the transaction.

And that is obviously correct: the entire system of payment card clearing depends on trust: the merchant trusts the bank to send the money which is approved by the authorisation code and therefore provides the goods or services to the customer-cardholder.

But if, in the absence of fraud, the bank could cancel any transaction at the option of a customer, then the entire payment card system would break down. Merchants would not be able to trust that approved funds would in fact be paid and, as a result, they would not release goods or provide services to customers until the money was credited to their account.

That logic, however, is beyond the ken of TD Waterhouse's UK customer services team and payment processing department who, together, flatly refused to try

a) to cancel the transactions by use of the authorisation codes. They argued that the entire transaction is handled by their payment services provider, Streamline.

b) to telephone Streamline and inform them of the error and instruct them not to process the transactions to which the approval codes refer and to release any reserve that had been placed on the customer's account.

c) to acknowledge that the error had been caused by reason of the false statement on their website and to reimburse the customer the amount of the second and third transactions and to credit his trading account with the amount of the first transaction, pending the funds from the unintended transactions turning up either at the company or back in the client's bank account.

The representative of TD Waterhouse's customer services department failed to elicit any offer of assistance for the client from the payment services department who, he said was "unwilling" to telephone Streamline or to re-credit the client's current account.

Instead, he said, the client would have to wait until the payments worked their way through the system and then, in due course, two of the three would be refunded.

That, it turns out, is the company's policy - the website carries the following statement " Any duplicate deposits of the same amount, on the same day will be refunded to you, in due course."

But for the customer concerned, his account is depleted by GBP1,500 until "due course" has run.

That, the TD Waterhouse representative told him, would be "four or five days" until the money showed up in the company's accounts. And the company could do nothing because it does not receive authorisation codes, he said.

This, despite it being admitted that, if the transaction had been completed by telephone, that the amount would have been credited to the client's trading account immediately and it being explained that the only reason the credit would be applied is because of the trust between merchant and bank that the authorisation code evidences, therefore the company must see the authorisation code.

Further, even though the company takes card payments over the phone and therefore has a form of terminal into which information is manually entered, TD Waterhouse refused to use that system to cancel the second and third transactions, despite it being explained that the process is exactly the same as if an error is made by a shop which immediately cancels the transaction.

After further consultation with his bank, it was confirmed that there is no mechanism by which the client can recover the money via the bank until it arrives with the merchant and then a charge-back can operate.

That means that the client is out of pocket for however long the system takes to work.

And all because TD Waterhouse's website said that the card had not been verified leading to the only conclusion that it had not been charged when, in fact, it had.

All attempts to speak to a senior officer in either the company's anti-fraud department (who may have a clearer understanding the issues) or the managing director's office were rebuffed.

Attempts to contact TD Waterhouse's principle office in the USA failed: its website was broken and so no contact information could be readily obtained.

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