ULSTER Bank has apologised to the 1,300 customers it undercharged by an average of €30,000 each on mortgage accounts as part of an error stretching back over periods of between two to five years.
The latest Ulster Bank scandal – which involves the bank's unwitting failure to deduct a total of €41m from customers' accounts over prolonged periods – means that more than 1,000 customers will be asked to pay five-figure lump sums.
In some cases, customers face a bill of around €60,000.
Many of the affected customers are suffering the effects of the negative equity caused by the recession
The massive oversight was exposed yesterday by the Irish Independent.
At first, the bank refused to answer questions on this issue from the Irish Independent.
But yesterday it issued a statement, apologising to customers.
The statement said: "We apologise to any customers impacted by this, and it is our primary objective to ensure customers affected are treated fairly, and returned back to the position they would have been in should this error not have occurred."
The problem largely affects customers who took out loan products during the boom years, specifically those that came with front-loaded interest only "holiday" periods from three years upwards.
After the "holidays" expired, the bank failed to deduct the capital amounts as agreed under the terms and in some cases this was for periods of up to five years.
Most of the affected customers were believed to have taken out their mortgages with First Active before it merged with Ulster Bank in 2009.
Customers must now repay the outstanding sums in full.
Yesterday, a spokesman for the bank said it was offering affected clients four options to repay.
• An interest-free loan repaid over time.
• An extension to the term of the mortgage.
• To repay the capital and interest over the current term.
• Repayment in full in one lump sum.
It is not yet clear whether any of the 1,300 customers affected will attempt legal action against Ulster Bank.
While the Financial Services Ombudsman said the law would likely fall on the side of the contract terms which customers agreed with the bank and which outlined the payments in full with capital repayments as stipulated, customers may attempt to argue in court that the contract did not include unexpected bills for five-figure lump sums.
The Central Bank said it would not comment on whether or not it had evidence that any other banks had experienced similar issues.
But there have been no reports of similar under-charging issues of the same type by any other lender.