Banks can circumvent regulator on charges

Legislation from mid-90s allows for unregulated charge increases

The Central Bank

The Central Bank


Banks have been using 17-year-old legislation to unilaterally impose increased charges on customers without having to seek approval from the Central Bank, an Oireachtas committee has heard.

Financial institutions sought and received increased ceilings on an unspecified variety of service charges and fees ahead of the introduction of the Consumer Credit Act, 1995.

Section 149 of that act, which came into force the following year, gave power to the Office of the Director of Consumer Affairs to regulate the introduction of new charges.

That responsibility then passed over to the Central Bank in 2003 which only had the capacity to regulate charges applied for from that point on.

Retrospectively applied
However, those previously approved ceilings on increases can, and have been, retrospectively applied by banks without their need to even notify regulatory officials.

The Central Bank was unable to clarify with whom the ceilings had been agreed.

Stunned TDs yesterday expressed outrage that such a facility remained open to financial institutions given the hardships experienced by customers, with Fine Gael’s Kieran O’Donnell dismissing it as a “lucky dip” of charges open to banks.

The revelations come alongside today’s launch of details surrounding the personal insolvency service.

Yesterday, the Joint Oireachtas Committee on Finance, Public Expenditure and Reform heard that the Central Bank had either partially or fully approved 11 applications by banks to introduce increased charges this year.

That compared to the rejection of just one application, a situation committee chairman Ciaran Lynch said amounted to a failure rate of less than 10 per cent.

However, the committee heard that Ireland was the only country in the euro zone in which banks must seek sanction to impose further charges on customers.

Bernard Sheridan, director of consumer protection at the Central Bank, told members that the issue of unilateral increases should not be “overstated”.

But the reaction from the committee was one of universal incredulity.

“It would strike me that the banks have a kind of lucky dip of [available] charges since 1996,” said Deputy O’Donnell.