If the error is only received for a specific email address, the following are the steps in order to avoid receiving the error.
1. Look for another contact record with Identical email address and contact name which is not related to any customer and it did not have any transactions, cases or other relations to any other records (This could be done via global search)
2. Purge/delete the duplicate record
3. Edit the Customer Record
4. Manually Assign a password
5. Save
You should be able to Save the Customer Record without receiving any error.
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