BidPay issues bad money orders

May 30 - Western Union’s Bidpay.com sent out a batch of bad money orders in early May because of a software glitch, MSNBC.com has learned. A software upgrade at a third-party firm caused incorrect routing numbers to be printed on money orders purchased through the BidPay.com Web site, making them worthless, spokesperson Danielle Jimenez confirmed.

THE MISTAKE WAS quickly caught, she said, but not before about 1,000 of the bad money orders were sent to online auction sellers. Recipients who cashed the notes were hit with bank fees akin to those incurred when a check bounces.

Some of the money orders are being returned by banks to customers marked “counterfeit,” according to one victim, eBay seller Kevin Carten.

Jimenez said BidPay first noticed the error on May 20, but the bad money orders were actually dated May 12 and May 13. BidPay has attempted to contact all impacted customers through e-mail, and has offered to refund any bank fees, she said.

“We are working with our customers, and we are hoping to, by next week, get reissued money orders out to them,” she said.

Still, that leaves many of the customers without their money for nearly a month.

Rosalinda Baldwin, who runs auction watchdog site TheAuctionGuild.com, learned of the bad money orders from her readers. She was critical of Western Union, saying they did not act fast enough to notify victims.

“BidPay is making them jump through hoops to get their money back and their bank charges paid,” she said. “BidPay is also not contacting sellers who received the bad money orders, and does not have any information posted on their site about this.”

BidPay is Western Union’s online auction payment program. The service allows auction winners to pay with credit cards even when sellers doesn’t accept them. Bidpay users pay a fee, and the Web site then sends a Western Union money order to the auction sellers. Using BidPay can speed up the auction sale process, because Western Union sends an e-mail to the auction seller as soon as the firm mails the money order, guaranteeing delivery of the funds. That frees the seller to ship the auction item to the winner. Ordinarily, sellers wait until they receive the money order or check from an auction buyer before they ship the item.

The glitch will be costly for Western Union, Baldwin said.

“Even if it is only 1,000, at $25 a pop in bank charges they will have to reimburse sellers, that is still a chunk of change,” she said.