Etsy Error withdrew over $640,000 from sellers accounts without authorization

This latest Etsy Error could indicate bigger issues on the horizon!

On Friday February 15th 2019, US Etsy sellers got a very unwelcome surprise, Etsy had taken money from their accounts without authorization. 

According to Etsy's most recent announcement form Morgan Blake

Head of Payments at Etsy: 

"On Friday afternoon, we made an update to our billing system. Unfortunately, the update contained an error. While we were able to reverse the error in the update within a matter of minutes, the error ultimately led to three things happening:

1. A small group of sellers (approximately 0.1% of total active sellers) had incorrect charges go through to their payment card on file. Within hours, we initiated refunds to incorrectly charged cards.
2. An even smaller group of sellers had incorrect charges that were attempted, but declined by the card issuer.
3. We then reversed deposits scheduled for Friday and rescheduled them for Tuesday, February 19. This included deposits for sellers affected by incorrect card charges as well as those not affected."

So if I am reading this correctly, this error would have rolled out to everyone on Etsy had it not been stopped when it was. And frankly it is terrifying to realize that one small coding error could cause someone to lose everything in their bank accounts. 

Reports by various Etsy sellers indicate that Etsy's withdrew (or attempted to withdraw) random amounts from the seller's accounts. These amounts range from $395 to $114,000. Many sellers were hit with bank fees and late fees due to this error. While Etsy had admitted fault and is attempting to get the money back, many feel that Etsy has not done enough. 

During the height of this issue, Etsy only responded publicly once on the Bugs forum where the incident was reported. Reports are the Etsy did notify affected sellers via email, however many reported they could not get help over the holiday weekend. Also some reported having issues getting a working phone number to contact Etsy. 

However no public announcement or mass email was sent alerting all Etsy sellers of this issue. 

View the entire Bugs report here. 

Etsy's coding practices has also been under fire for several years. During the previous CEO's reign, Etsy announced a no-fault and live coding environment. This environment allowed any coder on staff to upload code directly to the site without penalty. 

"Q. Do you see your employees as hackers?

A. Absolutely. The internals of the company really embody the hacker spirit. The empowerment of the company is really on the edges. For example, we have 100 engineers, and any single engineer can deploy code to the live site at any time. It happens about 30 times a day."  Article source Bits blog at the NYTime

To Etsy sellers, this indicates a lack of a sandbox environment to test changes. This type of environment may have prevented these unauthorized charges from happening in the first place. 

At the date of this writing, Etsy has not released any actual plan to prevent this from happening again in the future. Etsy has indicated they are looking at how this "glitch" happened, but no plan of action has been released leaving sellers frustrated and scared.

 Etsy has lost the trust of its customer base. (After all, the sellers are Etsy's real customers. Without the sellers, Etsy would make no money.) Also there is no word on how investors are taking the news of this latest Etsy glitch. 

Practical Advice for Etsy Sellers

There are a few safeguards that Etsy sellers can put into place to protect their finances. 

1. Keep your personal finances separate from your business accounts. 

2. Restrict access to your accounts. Since Etsy requires a credit or debit card on file, acquire a rechargeable debit card (like the American Express Bluebird) to keep on file. 

3.Turn off any feature that will pre-authorize a payment, like an auto-pay feature. 

4. If you are hit with an unauthorized charge on your account, dispute the charge with your bank or credit card immediately.