Several financial institutions that purchased core banking software from NCR Corp. since the late 1980s have discarded the systems after being plagued by delays, corruption of data, and other major problems.
The problems led to several legal actions or threats of lawsuits that left egg on the face of the big computer vendor. AT&T Corp., which acquired NCR in 1991, is still coping with the aftermath.
Two customers recently settled their claims against NCR, now called AT&T Global Information Solutions, and a third was awarded more than $800,000 by an arbitrator, bank automation sources said.
In July, an Oklahoma bank sued in federal court, alleging fraud and misrepresentation.
American Banker also was told that a Florida credit union is considering legal action against the AT&T unit.
Global Information Solutions says that of 30 to 40 banks, thrifts, and credit unions that purchased the software, known as UFS, 21 are still using it.
Bankers said UFS, which stands for Universal Financial System, was originally touted as the successor to the CIF, or Central Information File, system that the Dayton, Ohio-based vendor had been selling for key banking applications since the 1970s.
Norm Cohen, whose Atlanta firm, Computer Consulting Systems Inc., has been retained by numerous bank users, said his clients "strongly believe NCR misrepresented the capability of the system, the readiness of the system, and undersold the users on the amount of hardware it would take to drive the system," as well as the level of support staff required.
Bill Maddox, a former vice president and data processing manager at Ventura County National Bank, said the UFS problems cost him his job. The way Mr. Maddox sees it, the troubles were at the heart of the $221 million-asset California bank's decision to outsource its data processing and let go eight of the 10 employees in his department.
"I kind of feel NCR has managed to ruin my career," Mr. Maddox said in a telephone interview.
Fred Doud, executive vice president of Central National Bank and Trust, Enid, Okla., said the mortgage-loan servicing piece of the software incorrectly calculated tax information and caused 800 erroneous statements to be mailed to homeowners.
In July, the Oklahoma bank sued AT&T Global Information Solutions for an undetermined amount of damages.
That suit - which is waiting for a federal district judge in Oklahoma City to decide whether the case should be tried in court or resolved through arbitration - cites a laundry list of problems with UFS. It also alleges NCR fraudulently misrepresented that the software was ready for market.
AT&T-GIS potentially faces settlements and awards that could reach into millions of dollars. Among the act.ions:
* Warwick (N.Y.) Savings Bank, which bought and later abandoned the system, settled in arbitration for $818,000.
* Pawling (N.Y.) Savings Bank has reached an out-of-court settlement with AT&T, which officials would not discuss.
* Officials at the Bank of Edwardsville, Ill., which also scrapped UFS, said last week they were in negotiations with AT&T.
* Broward Schools Credit Union in Fort Lauderdale, Fla., has retained a law firm and is considering legal remedies.
Officials at the former NCR would not discuss details of the litigation or specific problems with UFS.
But James R. Lowell, a company spokesman, said, "The majority of our customers are happy. And yes, we do certainly know there have been some problems with some other customers. They have made that clear to us and we are working with them individually on a case-by-case basis to make them happy."
Mr. Lowell acknowledged there were delays in the release of some product features, but he said they were typical of what occurs with any major new software package.
He also said some of the discontent may have resulted from a "misunderstanding" on the part of some users who were unaware of the on-site staff they would need to support the software.
Mr. Lowell refused to attribute the 30% drop in the number of UFS users to the systems problems. He noted that some of the customer banks may have been acquired in recent years.
Mr. Lowell said AT&T has not taken UFS off the market, although it is no longer actively marketing it. That decision, he said, reflects the company's move toward so-called open systems.
Mr. Maddox, the displaced Ventura County banker, said the software - which he was using for processing demand deposit accounts, commercial and installment loans, and other applications - was plagued with problems and delays from the beginning.
"They [NCR] kept saying things would get better," he said. "I never saw them get better over the six years . . . It seemed like every time we got a new release, we got different problems."
Mr. Maddox said Ventura had expected to require two analysts on-site to run the system, but actually needed three.
There were other problems.
"We bought the system primarily for a multibank environment and found that it didn't handle multibank very well," said Mr. Maddox. "We were running two banks [on UFS] but we had to run them as two separate banks rather than a multibank."
Mr. Maddox also said that the. automated system to transfer funds on checks that had passed through the Federal Reserve - a systems programmed to calculate amounts down to the penny - actually counted the withdrawals a penny at a time. When the Fed incorrectly encoded a check for $10 million, the system, he said, appeared to get stuck "in a loop."
After discovering the problem, officials later calculated that it would have taken the NCR system nine or 10 hours to count to $10 million a cent at a time.
Richard Cupp, Ventura's chief executive, would not discuss any difficulties with UFS.
Mr. Doud, the Central National executive vice president, said the bank purchased UFS in 1989 for $165,000, and additional NCR hardware for about $600,000. The first application - mortgage loan servicing - was converted in 1991.
Mr. Doud said there were so many problems that the bank never brought on any other applications.
"Virtually our entire data processing group was directed to support the mortgage loan system for a year and a half," the banker said. "They would sit daily and watch what went through the prior day to see if any problems occurred with it."
While NCR made efforts to correct problems, he said, "each fix seemed to create new problems. You had a system that wasn't really stabilized."
Mr. Doud said UFS consistently misapplied payments on loans it was servicing. Mistakes were made in calculations of principal and interest.
"The data was continually corrupted by the system itself," said Mr. Doud. "It drove our people crazy."
In June, Central Bank discarded the system for software from Jack Henry and Associates.
Mr. Doud said the bank decided to sue when it was unable to reach a satisfactory solution with AT&T-GIS.
AT&T offered the names of two bankers it said were satisfied users of the system. Neither institution, however, is a multibank holding company, nor did they install the UFS mortgage system for secondary markets - trouble spots cited by other banks.
Bob Campbell, executive vice president at Jefferson National Bank, Charlottesville, Va. which was a pilot installation of the NCR software, said it is pleased with the system but conceded it took longer than expected for it to get up and running.
James Lawrence, vice president and manager of information systems at Bank of Stockton, Calif., also had praise for UFS.
Mr. Lawrence, who had been an independent consultant to banks regarding UFS, added that he believed institutions reporting trouble with the system had "thrown up their hands" when encountering difficulties.
The bankers with complaints about UFS rejected that observation. Mr. Maddox, the former Ventura banker, noted that he and his colleagues had years of experience in data processing and had no difficulties running other systems.
Today, Mr. Maddox, who has 15 years under his belt in bank data processing, spends his time doing contract work for Frontier Bank, an affiliate of Ventura, and is looking for a new position.
"I may never get another job in data processing again," he said quietly. "I'm just not sure."
UFS is not the only NCR system to cause problems for AT&T-GIS. An inventory management system called Warehouse Manager has generated more than two dozen lawsuits, The Wall Street Journal reported last month.
Daisy Manufacturing Co., the Arkansas-based maker of BB guns, has also sued AT&T-GIS. Ralph W. Barbier Jr., a Detroit attorney who is representing Daisy, said, "All these claims are related, because it is the operating software that is the problem."
A bank's lawsuit makes these charges against NCR:
* The UFS software was not completely proven technology as advertised
* Technical manuals were not up to date
* The NCR 9800 computer could not easily accommodate increased volumes
* A secondary mortgage module was not ready
* Problems occurred despite NCR's quality assurance tests
Sources: Court documents