THOUSANDS OF bank customers could be in line for refunds after an inspection by the Central Bank uncovered a widespread failure across six financial institutions to apply the correct levels of interest on some mortgage and deposit accounts.
The audit also found at least one bank was guilty of misleading advertising and two others struggling to find customers’ signed loan applications in direct contravention of legislation.
The Central Bank is prohibited under law from naming the banks and was unable to say how much money was involved and how many bank customers had been affected.
However, AIB confirmed it was one of the banks involved and a spokesman told The Irish Timesthat some of its mortgage account and deposit account holders had been affected. He said those customers "would be refunded with compensatory interest applied where appropriate".
A Bank of Ireland spokeswoman said its customers were unaffected, while NIB also said it was not involved. Ulster Bank said it was “not aware of any significant product issues” in relation to the findings of the report but said it would carry out a review “to ensure that they are taken into account for products that we currently offer and continue to offer in the future”.
Over the last 12 months the Central Bank has examined five deposit products and six home loan products offered by six banks to 112,000 customers. It found that in a number of cases involving home loans, the banks had failed to apply promotional or discounted rates for a full year despite making commitments to customers that it would do so.
An investigation is ongoing at one bank to resolve the issue, while refunds are in the process of being issued to customers affected at another, the Central Bank said.
It said the banks had not wilfully tried to withhold money from customers and blamed IT systems errors.
The Central Bank said it was “particularly concerned to see that IT systems could not deliver the terms and conditions of the products examined, despite having previously raised this issue with the banks”.
It also found one case where promotional brochures were considered to be “unfair and misleading” to customers as they advertised an attractive equivalent annual rate but information relating to the actual rate payable was not clearly presented to the customer.
“Some promotional rate products can appear to be very attractive to consumers. However, [they] must be aware that the benefits usually only apply for a limited time and can be subject to restrictions,” said Bernard Sheridan, the Central Bank’s director of consumer protection. “Our inspection found that, in a number of cases, consumers did not receive the full benefit promised. We are working to ensure that affected customers are identified and refunded by the institutions,” he said.
It also found that two banks had difficulty locating signed application forms submitted by customers for home loan and mortgage products, despite the fact that they were required to retain all applications completed or signed by customers.