We have a reward product and the qualifying (higher) interest was paid to all customers. I'm not sure if there is any way to make the adjustment to correct this with the customer or if we even want to, but where would I look in a regulation to know what options I have, or if I have any?

You want to collect overpaid interest from your customers? Talk about a PR nightmare.

Is there a chance this reward product is associated with a program that starts with a 'K' and ends with an 'a,' Web?

Agreed - and with rates where they are, it's not the costliest mistake that will ever be made by the bank.

Yes, I know. I just want to know where to reference to put this to bed.

It isn't referenced.

Unfortunately, you aren't going to find any references for this as the writers of the rule did not foresee situations like this. Therefore, it is probably a matter of your contract as to whether you can reverse the funds.

My Monopoly Community Chest card says “Bank Error in Your favor. Collect $150.”

Besides the PR nightmare, a cost benefit analysis of not only what the refunds will look like, but also the time spent issuing the refunds and adjusting tax reporting amounts for effected customers. You may find that it is cheaper to let it go. As others have noted this will be governed by your account agreement and also a management decision.

So I'm drawing the conclusion that "an error is an error" applies here, my main concern would be timing, since the interest was deposited/credited back in January. OK, go back to the vendor contract and work it out. The bank will have to deal with any accounts whose balance is now less than the interest that was given. I foresee a bunch of $10 gift cards being handed out in the next couple weeks.

How much money are we talking about here? Putting aside the PR nightmare (which has a cost that is hard to even guess), how many staff hours will it take to do full research, remediation, documentation, and complaint/inquiry responses? What is the fully-loaded compensation rate (per hour) for the employees who will be taken away from other, productive, assignments to accomplish what would be required by a full remediation? After netting the implementation cost from the recovery, you have the real "benefit"...does it justify the PR hit and opportunity cost?

Don't know if OP's issues are similar, but I've got about 1,400 known accounts affected but only the middle 4 figures for interest total. I'm inclined to suggest they learn & move on.

I didn't even think about this at first, but if this was because of a vendor error and not a bank error then I would absolutely go back to the vendor and request reparation (if that's provided for contractually). If the contract requires that the vendor providing reparation would require you try and get the money back from your customers though... then you're back to calling it a nice gift to your customers and letting it go.

I agree. And note that some of the comments above talk about issuing gift cards or otherwise sending out payments. That's not what the OP is about. Web's customers were paid too much, not too little. So as much as it might cost Web's bank to do all the work to determine who owes how much, collecting it would create a bigger nightmare of the adverse publicity and ill will kind.

Recommended: If you have recourse to the vendor, pursue it. If not, learn from it and move on.