The Verge reported on Thursday that a growing number of customers have been complaining about unauthorized withdrawals being made by Coinbase out of their accounts. In some cases, the withdrawals were so much that customers’ linked accounts were drained below zero and resulted in overdraft charges.
A typical story of these wrong charges is when a customer used $300 to buy some cryptocurrencies. A few days later, each of the purchases was repeated 5 times, resulting in a withdrawal of $1,500 from the customers’ account, resulting in overdraft charges. Another customer said that he had been charged more than 50 times taking his total to $67,000, which forced him to close his bank account. Another few complained about these charges rendering them penniless just when their utilities and rents were due.
Coinbase reps have been trying to respond to all complaints for the last two weeks, but these incidents saw a sudden spike in the last 24 hours. Customers have been flooding the Coinbase wall with complaints with regard to this issue. Many have suggested that Coinbase is either committing fraud or has been hacked.
Bloomberg reported that the San Francisco based company had found a solution to this issue and said that going forward, customers will no longer be wrongly charged in such a manner. Coinbase also released a statement on Twitter promising that all customers who were affected by this issue would be fully refunded for any wrongful charge or withdrawal. The exchange said that they expected this refund to automatically take place through the customers’ banks.
According to a news report by Fortune, these wrong charges were actually not Coinbase’s fault. The cryptocurrency exchange was able to identify the issue by Thursday evening. Visa had retroactively reversed as well as re-submitted multiple Coinbase charges.
This was done because of a new a new payment code that was demanded by the big banks earlier this year. This merchant category code (MCC) now treats all Visa charges made on Coinbase as a cash advance, which also means that it comes with a much higher transaction fee, almost as much as 10%.
The switch to cash advances came just when the big banks such as JP Morgan Chase, Bank of America Merrill Lynch, Citigroup, Capital One and Discover took steps to ban the use of credit cards to buy cryptocurrencies. This may have been the reason why the multiple charges got triggered on Coinbase customers’ accounts.
Dan Romero, Coinbase VP and general manager, told Fortune that the company immediately began an investigation as soon the first reports started coming in. They were able to discover that the problem was with Visa and not the cryptocurrency exchange.
However, Visa refused to accept blame for this debacle, stating that only Coinbase customers had been affected. A Visa spokesperson stated that the company had not made any changes in their systems which would have resulted in such multiple transactions as are being reported. The spokesperson also stated that they were not aware of any other merchant who had similar complaints with regard to the charges.
Visa pushed the blame on, saying it was probably Coinbase’s acquiring bank, Wordpay. Wordpay is one of the country’s largest processors. Visa also said that it had reached out to this processor to offer any assistance. Coinbase however, confirmed that it was only Visa card holders who had been affected.
Thus, by Friday afternoon, Visa began the process of refunding all the accounts impacted by this glitch. Coinbase was to meet with both Visa and Wordpay to understand where the problem began.