A leading year 2000 lawyer has set up an action group to bring a legal test case against HSBC after the millennium bug disabled thousands of bank credit card swipe machines during the busy Christmas period.
Graham Ross, vice chairman of the Y2K Lawyers Association, and principal of Cheshire law firm Ross & Co, is threatening to sue the bank unless it agrees a voluntary compensation scheme for thousands of small retailers hit by the problem.
Shoppers were left unable to pay for their goods when a programming error disabled 14,000 Racal credit card swipe machines, supplied to retailers by HSBC, on 27 December. Six thousand Racal machines supplied by other banks were also hit.
Ross has written to the bank urging it to set up a voluntary compensation scheme for retailers that lost business, wasted management time, or had to pay bank charges because credit card transactions were not processed in time.
"The losses suffered are an order of magnitude greater than people realise," said Ross. "We want to avoid the bank getting into quick low-cost settlements with their customers. If a third party loses them money, it is right that the money is repaid."
The problem struck swipe-card machines supplied to the bank by Racal. According to HSBC, the machines contained a programme that looked ahead four days. The system wrongly interpreted dates in January 2000 as January 1900.
HSBC said that it had not paid out any compensation to retailers but said it would take the matter up with Racal if any customers had lost money.
"We are talking about small retailers. I don't suppose they had long queues of customers waiting to pay by credit card. That is not to say that we don't take the matter seriously. But we have not had a significant customer reaction," the company said.
Ross claimed that the incident could highlight poor contingency planning by Racal and HSBC. Racal had failed to notify retailers of a special code they could type in to their card readers to override the problem in advance. And HSBC appears to have failed to test the card readers over the critical dates, he said.
Racal said that it did not know how the problem had been missed. The company pointed out that only 2% of UK retailers had been affected by the problem.