Probe into possible €50m overcharging
Anglo Irish Bank has started an investigation into potential overcharging of customers on loans given out over a five-year period. The bank may owe up to €50m to the customers affected.
An incorrect interest rate may have been applied to a large number of loans and customers may be owed between €30m and €50m by the bank, chief executive Mike Aynsley said yesterday.
The loans in question were given out between the late 1990s and July 2004 and Anglo may now be facing a liability to customers who may have been adversely affected.
The only interest rate that can be applied to loans is the rate agreed in the original loan agreement.
It is understood in some cases customers were charged between three and five basis points extra, although it is not clear whether this was done deliberately or simply because of human error, said Mr Aynsley.
A senior executive of the bank, Jim Bradley, is heading up an internal review into the potential overcharging. Because the period involved is so long, the review could take a long time, said Maarten van Eden, the bank's chief financial officer.
"The bank will have to examine a substantial amount of historical customer loan documentation before it can estimate the amount of any liability," he said.
Ironically some of the customers owed money are likely be in arrears with the bank on other loans. If these customers are due a repayment from Anglo, it may simply be subtracted from their outstanding arrears. This issue is being looked at closely, said Mr Aynsley.
The potential overcharging at Anglo follows recent incidents of overcharging at other banks. AIB recently admitted charging 40,000 customers incorrect fees and interest over several years and last October Bank of Ireland admitted a computer fault which led to customers being double-charged on Laser and ATM transactions.