THE FINANCIAL Regulator has said it is reviewing how to strengthen enforcement against overcharging by banks after AIB admitted charging 40,000 customers incorrect fees and interest over several years due to an error discovered in November 2008.
Matthew Elderfield, who took over as head of financial regulation last month, said that the regulator was concerned that financial institutions “continue to experience control failures” that result in customers being overcharged.
AIB estimated that refunds to customers would total €4 million, but the bank and the regulator said in separate statements that it would not be possible to quantify the number of customers affected or the total refunds to be paid until the matter was fully rectified.
The bank overcharged customers by mixing up business and personal customers, applying incorrect charges, fees and interest in each case.
The error was discovered in an “ongoing review” of services and procedures, AIB said, and it may have incorrectly classified accounts “over a number of years”.
In a statement released shortly after the regulator’s notification of the overcharging at AIB, Mr Elderfield said that it was clear from recent cases that “change is needed” in how companies handle charging and pricing issues.
“While the complexity of cases vary, it is nevertheless disappointing for consumers that resolving errors and providing restitution can be so drawn out at times,” said Mr Elderfield, the former regulator in Bermuda. “It is also apparent that the current approach to enforcement falls short of what is required to provide a strong incentive for faster responses and better practice in the first place.”
Mr Elderfield said the regulator was conducting a review “to strengthen its approach concerning the timeliness of resolving overcharging in firms and the grounds for enforcement actions against such failures”.
The regulator’s new assistant director general for enforcement would also carry out a review of its wider enforcement strategy following their appointment, he said.
AIB has hired accountancy firm KPMG to oversee the payment of refunds to customers after the regulator directed that the process be independently verified.
The regulator directed the bank to inform all customers affected by the last incident of overcharging at the bank by the end of this year and to be refunded in full by the end of March 2011.
In 2006 AIB agreed to repay €65 million to customers who had been overcharged on foreign exchange and other transactions between 1996 and 2004.
Irish banking has been beset with overcharging controversies over recent years.
Bank of Ireland was forced to repay tens of thousands of customers who were double-charged on Laser card transactions on two occasions last autumn.
Credit card company MBNA refunded about €18 million to customers last December after it discovered an error in how their interest had been calculated.