Update: Billing nightmare for DreamHost customers

DreamHost customers woke up to a nightmare on Tuesday after the Web hosting company made a major billing mistake overnight that has resulted in many getting their credit cards charged automatically for hundreds -- and even thousands -- of dollars.

In an official blog posting, the company said that Monday night it ran "a standard billing cycle to clean up stragglers from 2007" but by mistake set the overdue-payment parameter for the end of 2008.

"This caused everyone to be billed as if today was 2008-12-31, wreaking the havoc that we are so sorry you had to be put through," the posting reads.

The wording on the posting seems to indicate that all of DreamHost's customers were affected by the billing mistake. DreamHost hosts more than 600,000 domains, according to its Web site.

WebHosting.Info, a research and statistics portal focused on the Web services industry, lists DreamHost as the 11th-largest Web hosting provider in the U.S. and the 15th-largest in the world .

DreamHost, which has been in business since 1997, didn't immediately reply to requests for comment.

In a subsequent posting to the Official DreamHost Weblog , company official Josh Jones provided more details about the mishap and revealed that DreamHost has incorrectly billed its customers for a total of $7.5 million.

At press time, DreamHost was in the process of issuing refunds to customers who got charged automatically.

Still, the company apparently has another problem on its hands related to customers who hadn't signed up for automated billing: The system suspended a number of those accounts for nonpayment and took their sites offline.

That's the situation in which Justen Deal, a DreamHost customer for about eight years, finds himself at press time (around 6 p.m. U.S. eastern time).

"DreamHost is apparently so tied up with getting the $7.5 million they temporarily borrowed back to its rightful owners that they can't be bothered to re-enable the inaccurately disabled accounts," Deal said.

Deal sent several messages to DreamHost's tech support inbox, but they bounced. He finally managed to get one through this afternoon, although he harbors little hope that it will be replied to.

Among the hundreds of mostly angry comments that customers have made to the blog posting are complaints that the billing pushed credit card accounts over their limit, triggering bank penalty fees and locking up cards.

"If I end up having to pay special interest fees because you trigger an overbalance, I’ll be contacting your billing team for compensation," wrote one customer.

Other customers commented that they are spooked that DreamHost could make a mistake of this magnitude with something as sensitive as billing, and have thus decided to cancel their accounts.

"My account is due for renewal at the end of this month, and barring something spectacular, it looks like I'm taking my business elsewhere," wrote another customer.