NEARLY 500,000 MBNA card holders are to receive refunds totalling €18m after the credit card provider owned up to overcharging its customers.
The company said that overcharging related to the way interest was charged to Irish customer accounts.
It insisted it had spotted the error itself and had immediately reported the mistake to the Financial Regulator.
The credit card company would not say how many customers were affected by the overcharging. It would only say that "tens of thousands of customers" were affected.
However, if an average of €38 is to be refunded, with €18m to be paid back in total, dividing the two figures means that around 474,000 customers have been overcharged.
MBNA said that 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 that 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 was now assessing the impact on customers. It said this would be a lengthy process, but it hoped to refund affected customers by March 2010 at the latest.
It said the refund to most of the affected customers was likely to be around €38 or less.
The company said the error had been reported to the Financial Regulator and terms and conditions had been corrected.
Consumer advocate Brendan Burgess responded to the overcharging admission by calling for independent supervision of the MBNA refunds process.
He said the interest repaid on the overcharged accounts must be refunded at the same rate MBNA charges on arrears.
"MBNA imposes very high penalties on people who have been in arrears. These penalties are among the highest charged by credit card companies in Ireland," Mr Burgess said.
Mr Burgess, the founder of askaboutmoney.com, said if the overcharging has caused people to fall into arrears, then the penalties and charges associated with going into arrears will have to be refunded as well.
He added that the company is very aggressive in pursuing arrears, calling customers up to 18 times a week.
MBNA is one of the three largest credit card providers in this market. A study by the Financial Regulator in 2007 found that credit card issuers in Ireland make twice the profits per card being made by their counterparts in the US.
The American card issuer admitted in October that it greatly increases the interest rate it charges some customers who are in arrears.
A spokeswoman for MBNA admitted it increased the interest rate from 14.9pc to 25.9pc for customers it regards as "high risk".
This is thought to be a means to encourage people with persistent arrears problems to pay off their credit card balances and stop doing business with the card provider.
Along with issuing cards in its own name, MBNA provides credit cards for Ryanair, EBS, Axa Insurance, Sony, Liverpool Football Club, Munster Rugby Club, the Irish Nurses Organisation, Postbank and the Irish Farmers' Association.
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