By Chris Zappone
Diners Club accounts potentially worth a turnover of more than $1 billion had incorrect data added to them as a result of the company's transition to a new computer system in mid-June, according to internal documents obtained by BusinessDay.
The problem, one of a string of technology glitches afflicting Citi-owned Diners Club Australia since June, means ''customers may not be able to reconcile and pay accounts within terms,'' according to internal Citibank documents dated earlier this month.
Customers affected include major companies such as Woolworths and Qantas, and the Australian Department of Defence. Account woes include missing transaction information, incorrect balances and erroneous GST payments for merchants using Diners' cards, the documents reveal.
Diners Club Australia has strongly denied the severity of the problems and disputes the $1.1 billion turnover figure, but would not clarify.
''There was a period of a few weeks when full reporting was not available to some of its corporate customers,'' said Citi Australia director of cards Madeline O'Connor in a statement.
Diners Club ''confirmed this had been rectified going forward''. It also said it had extended the terms that impacted customers so that they were not financially affected.
''In the instances where full reporting was not available for a short period, Diners Club is working in cooperation with individual corporate clients to ensure full reconciliation of reports.''
Although the scope of the Diners Club's technology problem remains unclear, many Diners Club merchants and card holders have complained of disarray in their accounts in the past two months.
Diners Club maintains it has already resolved the incorrect data problem but the internal documents, obtained late last week by BusinessDay, show no date listed for the resolution of the issue.
The documents also show Diners Club's computer upgrade, which industry insiders claim was rushed through without proper trials and testing, has also caused thousands of transactions on corporate statements to provide incorrect GST amounts, disrupting the card's ability to give some of its business clients streamlined GST reporting.
Diner Club says the project was not rushed, taking a full nine months with appropriate testing. However, an industry source claims the closing on 27 June of the Melbourne office which had knowledge of the old legacy system, Daisy, contributed to the change-over problems. The new system went live on 11 June.
Sources close to the merchant card company said fewer than 5000 Qantas-related transactions were affected.
The documents said Qantas-related transactions from June 12 and 13 ''may not have claimed all GST credits as we understated GST on these transactions.''
The under-5000 figure also includes Qantas-related transactions from June 12-24 that may show an overstated GST amount, causing customers to ''claim more GST than they were entitled to.''
Calculations based on the internal Citi documents put the figure of potentially affected Qantas-related transaction as a ''subset'' of 56,524.
Diners Club confirmed the GST errors occurred over the two-week period but said this affected less than 1000 transactions. ''In the few instances where GST was applied incorrectly, this is now being reversed,'' Ms O'Connor said.
Qantas had no comment on the matter, although sources close to the airline reported that it ''had experienced an issue with Diners Club.''
The tax issue has also resulted in overseas air travel tickets being assessed with GST charges, although only domestic flights should be, said another source close to Diners Club.
The impact of the problems surrounding Diners Club transactions has prevented Citibank-owned Diners Club International from reporting its June transactions to the Reserve Bank, which tracks charge card statistics.
Listed as a ''medium'' severity problem, the documents show that RBA reporting has been delayed. ''June reporting has not been submitted and July reporting is due 20 August.''
Diners Club would not comment publicly about the issue.
The RBA, citing confidentiality requirements covering its dealing with specific financial institutions, refused to comment, as well.
The problems for Diners Club began on June 11, when the ECS+ transaction account system, in use elsewhere was rolled out to replace an older system, dubbed ''Daisy'', said a source close to the company.
With only two weeks' transition time between the systems, and insufficient training for Diners Club employees who would use it, accounts were thrown into disarray for corporate clients and small business customers, the source said.
Many Diners Club customers say they have been kept in the dark about the status of their accounts, or referred to the call centre which itself has received little training on the new system.
Diners Club says the training is ''on-going and regular.''
''This training includes face-to-face, manuals and support materials,'' Ms O'Connor said.
Merchant card customers as well as card holders have grown exasperated by problems of tracking their accounts, or in some cases being paid.
''We were just beating our heads against the wall,'' said a Sydney-based restaurateur who said he was owed more than $1000 by Diners Club, declining to give his name.
''Calls to their call centres in India and faxes to them by us have received no response,'' the proprietor said, who said he has been told by an Australian-based Diners Club employee the problem will be fixed.
''Our biggest gripe was that we had no one to talk to who would really help.''
Melbourne-based media relations firm Through said it was unable to complete its quarterly business activity statement required by the Australian Taxation Office because their Diners Club paper statement came five weeks late.
''I think they would have lost a lot of small businesses because the headache that they caused us,'' said Through managing director De-Arne Carr.
''I think a lot of businesses like me are reassessing their credit card providers because Diners Club may not be an option for small business now.''
As of yesterday, Ms Carr said the online transaction summary still wasn't working in full, however Ms Carr said she had received one call from Diners Club this week in response to her numerous inquiries.
Diners Club denies reports that the system is not working.
Ms O'Conner said: ''Diners Club online transaction summary is working and customers are able to log on and access their transaction details.''
Diners Clubs' problems with their online transaction summaries had a ''high'' impact on the company's call centre, the document shows, noting online transaction summary details ''are missing or inaccurate.''
The company acknowledged ''brief service interruptions to its online transaction service'' which it ''promptly rectified.''
The internal documents, however, list missing subtotals on accounts, along with missing transactions.
Other problems on the internal documents included missing new charges, international displays on currency, and an exchange rate not displaying against transactions.
The company, however, said ''customers are able to use and access the online transaction system'' while acknowledging changes ''to the display and format of the system.''
Some of the service issues reported by Diners Club customers, in their words, verge on the ''comical.''
Cardholder Mark Colson was trying to get verification of a refund from a shop that he couldn't see on his online statement.
''The call centre told me it was actually showing as a refund on their system, so it was probably just a printing error, or that I couldn't see the small 'negative' sign.''
''The heavily-Indian accented agent told me that the negative sign was 'just a tiny dash of ink' which he felt explained why I couldn't see it.''
''Funnily enough, I can't see it on the screen either, but then I guess it's only a few pixels there after all.''
''The call centre may have a point. The difference between a positive and a negative number is just a tiny dash of ink,'' Mr Colson said. ''But in the world of global finance in which Citigroup operate, that dash of ink has real significance which is rather more substantial than its dimensional geometry.''
Mr Colson said he believes that his account balance is correct, although as of yesterday, he still couldn't confirm it.
A source close to Diners Club said the transaction system, called ECS+, is designed to handle credit cards ''for people who carry plastic in their wallets'' rather than the monthly corporate transactions.
Diners Club disputes this conclusion, as well.
''ECS+ is widely recognised within the industry as best-in-class technology to support cards payment schemes,'' Ms O'Connor said. ''It successfully supports Citibank commercial cards programs across Asia-Pacific and is also used by other Diners Club franchises globally.''
ECS+ replaces ''Daisy'', a system long used by Diners Club Australia, to manage large corporate charge accounts that are settled monthly, that was set to expire by the end of 2010.
Because of Diners Club's ease of use for large clients like Woolworths, Coles, and the Department of Defence, it has long been considered a ''cash cow'' businesses, providing organisations easy-to-use cards for hotel, air line, car rentals and cash access, said a source close to the company.
Coles were unavailable for comment. Woolworths confirmed last week that it had had problems with Diners Club.
The Department of Defence confirmed it has been ''experiencing several service interruptions following a major system upgrade'' and said it was ''working closely'' with Diners Club to ''rectify these issues and expects resolution shortly.''
The internal documents describe cards newly issued to Department of Defence members not working at Australian Defence Credit Union and Commonwealth Bank ATMs.
The material also showed that up to 60,000 Department of Defence customers, who generate turnover of about $50 million, were being charged ''incorrect cash advance fee rates'' for two weeks in July.
Citi's Ms O'Conner refused to comment on individual clients.
''Diners Club continues to work with its clients on a case-by-case basis on any outstanding matters,'' she said.
Repeated requests for comment from Commonwealth Bank went unanswered.
Australian Defence Credit Union, however, said there had been ''no problems with Diners Club cards to their knowledge'' and referred questions to the rediATM network, which maintains ATMs used by ADCU members.
A spokesman for rediATM said the company was no aware of any system-wide problems, although Diners Club is one of the less commonly used cards, he said.