Albuquerque hairdresser receives $160K tip by mistake

Credit card app blamed for adding thousands of dollars to customer's tips

ALBUQUERQUE, N.M. (KRQE) – An Albuquerque hairdresser received bigger tips than any hairdresser the world has likely ever seen. But there’s a problem; her customers are giving her those tips by accident, and those accidents have led to a maze of problems.

Inside a modest shopping mall in northwest Albuquerque, longtime hairdresser Dawn Warnack is making a modest living beautifying customers with cuts, colors and style.

“Sometimes it’s feast or famine,” said Warnack. “I did raise three kids doing this profession, but you have to work hard and you have to have a lot of clients, and you have to love it.”

She’s made a name for herself over the last 18 years in Albuquerque, building up clientele along the way.

Warnack was named best hairstylist in 2016 by Albuquerque The Magazine.

“She’s great,” Sandra Sanchez, one of Warnack’s clients, told KRQE News 13.

“It allows you to be creative, it allows you to be social,” Warnack explained of her profession. But despite her skills, it surprised everyone when Warnack received the biggest tip she’d ever seen last August.

“I’m good but I’m not that good!” Warnack laughed.

A client swiped her credit card, chose a tip amount, and signed for the total using a popular credit card payment application.

“She leaves me like a $3 tip and it turned into $3,000,” Warnack recalled.

She immediately called PayHub, the company that runs the app she uses for mobile credit card payments.

Warnack said a PayHub representative told her how to process a refund before the transaction finalized. The crisis was averted until another client came in.

“I said, ‘let’s just see if it happens to you.’ I was just joking!” Warnack recalled.

“And sure enough she gave me a $25 tip and when it went to finalize it said $25,000. So she panicked, I panicked.”

She immediately refunded the mistaken tip through the app and notified PayHub once again about the glitch.

Days later, Warnack gave highlights and a haircut to long-time customer, Sandra Sanchez.

“I’ve been coming to Dawn for at least 10-15 years,” said Sanchez.

Sanchez said she swiped her credit card with Warnack’s PayHub app, then chose a tip amount for the $80 service.

“I selected 20 percent, the button, and went ahead and signed my name with my fingertip,” said Sanchez. “It was not doubled or anything like that.”

Long after she left the salon, Sanchez woke up to a mobile alert from her bank at 4 a.m.

“Insufficient funds,” Sanchez recalled. “It does definitely make your heart stop for a minute.”

The money in her bank account was gone. Sanchez figured she was a victim of identity theft, until she saw her hairdresser’s name on the charge.

Receipt for $160,580.25 tip
Receipt for $160,580.25 tip

Sanchez’s $16 tip turned into $160,000. To be exact, a tip for $160,540.25 actually went through. She said her bank told her once the original purchase was approved, the tip was automatically green-lit.

“People trust you that when you do their hair, they trust you with their hair and then they trust you with their money,” said Warnack.

The hairdresser immediately refunded the massive tip and worked with her customer’s bank to fix the problem.

“When they give you a tip, that’s out of gratitude, it’s not expected,” Warnack told KRQE News 13. “So then something like that takes advantage of their gratitude and it makes me uncomfortable. I don’t want people to think that I was the one putting the money in.”

After settling the problem with her customer’s bank account, it turned out Warnack’s problems weren’t over.

She received a bill from PayHub for their cut of all those transaction fees, nearly $3,000. That’s more than she normally makes in a month.

“What’s the whole point of having a refund button if you’re gonna get penalized for using it?” Warnack asked.

“If you go to the grocery store and refund something or give something back, it’s done. You don’t have people coming back to you saying you owe fees on something that you returned or on money that you returned,” she added.

To make matters worse, the IRS is now involved. The $160,000 she never made showed up on her 1099 as income for the month of August.

“The whole thing is wrong,” said Warnack. “I can’t be the only person this has happened to.”

KRQE News 13 found out she’s not the only one who’s had issues with a tip glitch on PayHub.

PayHub’s customer service told KRQE News 13 to email Central Payment Systems, which processes payments for the Texas-based company.

Central Payment Systems directed KRQE News 13 to SignaPay, PayHub’s parent company. SignaPay’s Vice President of Business Development told KRQE News 13 over the phone it appears there was a system-wide error last August and September.

Merchants around the country reported erroneous tip amounts to businesses that use PayHub. However, SignaPay assured News 13 the glitch is now fixed.

So why is Warnack being charged thousands in transaction fees for PayHub’s problem?

“They still now won’t return my phone calls or return my emails,” Warnack explained. She said she’s been disputing the transaction fees for months.

After News 13 started asking questions, Warnack got a call Monday from a Central Payment System representative who assured her the issue will be resolved, and the company will no longer charge her transaction fees for the mistake.

Warnack has since stopped using PayHub, and now uses a different app.

Her customers aren’t holding the tip mistakes against her. Although, some clients have gone back to writing her old fashioned checks.

Sanchez said she’s now keeping a closer eye on her emailed receipts after swiping her credit card.

“I thought at the time, well I know what I spend and I’m pretty good about that,” said Sanchez.

“It does make me realize that there’s more than just yourself and the merchant that might be involved,” she added. Sanchez warns other consumers to always read the finalized total on credit card purchases.

Warnack’s biggest tip is one for the books.

The hairdresser is still working with the IRS to fix her tax mess. Her client that left the $160,000 tip said she’s thankful she had mobile alerts set up from her bank, or she may not have caught the mistake early enough.

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