AIB overcharges 40,000 customers in fee blunder
Account holders must wait 14 months for refund
AIB yesterday admitted overcharging 40,000 customers in the latest of a long list of blunders by the country's biggest bank.
And it says it will be another 14 months before all the customers will finally be repaid the charges wrongly levied on them.
The bank charged business account rates to personal customers, with some of the overcharging going back 10 years.
It will now write to affected customers and repay €4m -- an average of €100 to 40,000 people.
Yesterday, the new financial regulator, Matthew Elderfield, blasted the bank for taking so long to inform customers about the mistake, which was discovered in November 2008.
It took AIB 15 months to tell customers they had been overcharged and will take the bank until March next year to refund everyone because of the painstaking trawl of accounts that has still to be completed.
Mr Elderfield said yesterday he had ordered a review of how all banks handled overcharging issues, as well as the way the regulator reacted to overcharging admissions by banks.
The new regulator said: "It is clear that change is needed in how firms handle charging and pricing issues."
In a statement, AIB said it first told the regulator about the overcharging errors in November 2008, as soon as it spotted it. The bank said it would be the end of this year before all affected customers would be contacted and it was working to ensure "they are fully reimbursed where appropriate by March 31, 2011".
However, Mr Elderfield said he wanted these errors rectified faster.
"While the complexity of cases vary, it is nevertheless disappointing for consumers that the approach to enforcement falls short of what is required to provide a strong incentive for faster responses and better practice in the first place," he said.
Under the statutory consumer protection code, banks and building societies are required to "speedily, efficiently and fairly correct an error".
Fines of up to €5m can be imposed on financial firms that breach these rules.
AIB said it had appointed accountants KPMG, at the insistence of the regulator, to sort out the overcharging and promised to pay "compensatory interest" to those customers who lost out.
Some €4m will be returned to customers, but the bank could not say what the maximum pay-out amount was likely to be.
It said personal accounts and business accounts ended up being wrongly classified. "This means that some personal accounts may have been classified as business and some business accounts as personal."
The mix-up meant the wrong fees and charges were levied on 40,000 customer accounts. The bank said it would not be seeking to recoup fees from business customers who ended up being undercharged.
"Systems changes have been made to prevent a recurrence of this issue," the loss-making bank said in a statement.
This is the latest in a raft of overcharging scandals to engulf Ireland's biggest bank.
Over the past few years, it has been forced to refund customers after overcharging some of those on tracker mortgages, it had to compensate 34,000 students who were overcharged, and it was found to have applied fees on overdrafts incorrectly, affecting 24,000 customers.
Other banks have also been in the firing line for overcharging. In November, Bank of Ireland was forced to own up to double charging up to 160,000 customers who used their Laser debit cards. It was the second month in a row it had double charged customers.
In December, credit card provider MBNA said almost 500,000 of its customers were due refunds of €18m in total, after an interest-charge blunder.
Consumers' Association chairman James Doorley has called for a complete review of the charging systems of all finance firms. "We have had dozens of cases of overcharging. Are their systems so bad that they keep doing this?"
Mr Doorley said it was unacceptable that so many cases of overcharging had arisen in the past few years.