Card firm faces rap over €18m fees error
THE Financial Regulator is considering imposing sanctions on MBNA after the credit card provider admitted overcharging its customers a total of €18m.
MBNA has begun to refund about 500,000 customers in the past few days. The overcharging was first identified at the end of last year.
Amounts have been credited to customers' accounts stating that interest has been refunded, and interest on government tax has also been refunded.
The customer accounts were also credited with "compensatory interest" refunds.
Sums refunded vary from €2.92 to €147, according to posters on the www.askaboutmoney.com website.
A spokeswoman for the Financial Regulator said she could not comment on how the watchdog interacted with regulated firms. However, sources in the financial services sector indicated that MBNA was likely to face sanctions from the regulator.
Matthew Elderfield, the new head of financial regulation, has spoken out strongly about banks and other financial firms overcharging their customers and condemned the fact it takes so long for refunds to be paid.
Earlier this month, Mr Elderfield said he was keen to see firms "move more quickly to clear backlogs in handling overcharging cases".
He warned they would face enforcement action if time lines were not met. "I would encourage firms to act now to accelerate their work before we get in contact," he said.
A spokeswoman for MBNA insisted the card provider had spotted the overcharging and immediately informed the regulator. Officials in the regulator's office were informed at all stages of the refunds process, she stressed.
Letters would go out to each customer who had been affected in the next few days, but she admitted these were "generic letters" and did not detail how the refunds had been calculated in each case. Those who wanted to query how the refunds were calculated could phone the number listed in the letter or email MBNA, she added.
The company said that overcharging related to the way interest was charged to Irish customer accounts, and the average overcharged amount was €38.
MBNA said it had applied interest in line with what it said it would do in its marketing material. But when it came to describing, in its terms and conditions, how it would apply interest, there was "a drafting error" going back to 2007.
This meant it applied interest to some accounts where its own terms and conditions prevented it from doing so.
The company then conducted a full review of accounts going back to 1997, which uncovered another error. This time it found it had wrongly applied the government tax charged on accounts up to 2007.
MBNA said it hoped to refund customers by the end of this month at the latest. The company said its terms and conditions had been corrected.
See also Your Money, pages 40 to 43