Consumers have been given refunds totalling over €69 million as a result of investigations by the Irish Financial Services Regulatory Authority (Ifsra) into improper charging by banks and insurance companies.
The financial regulator said it had identified 259 separate incidents of overcharging across 32 institutions in the period from its establishment in May 2003 to the end of 2004. Weak internal controls, human errors when making manual interventions in IT systems, failure to properly test new software and poor management were to blame, the regulator said in its first annual report.
Some €34.2 million of the €69 million in refunds related to foreign exchange mistakes and other overcharging incidents at AIB. Credit institutions and bureaux de change accounted for €60.9 million of the refunds, while 24 charging issues were identified at insurance companies, resulting in a further €8.2 million being repaid. The refunds ranged in value from 1 cent to €5,000.
During the period May 2003 to December 2004, the financial regulator carried out over 700 onsite inspections and reviews.
Although the regulator did not name any of the financial services companies at fault, problems identified during the inspections included the underestimating of operational risks, directors and senior management being appointed without prior approval, inaccurate calculation of the adequacy of the company's capital, inadequate compliance with anti-money laundering obligations and lack of awareness among compliance officers of certain regulatory requirements.
Liam O'Reilly, the financial regulator's chief executive, said he was confident that the systems and controls in financial institutions were generally robust and that regulated companies were now clear about what was expected of them.
"Most of these charging issues have arisen out of poor systems and controls or human error rather than from any deliberate intention to overcharge," he said.
Mr O'Reilly said new fitness and probity requirements for directors and senior managers of regulated financial firms would help ensure that companies were properly run, while a new consumer protection code due to be implemented next year will bring significant benefits to consumers.
The consumer protection code is expected to include a ban on unsolicited credit offers. "Where we do not get compliance, we now have administrative sanctions powers to deal with serious transgressions," he said. "We also expect that the very existence of these powers will serve as an additional incentive towards full compliance."
Up until the end of 2004, the financial regulator received over 24,000 calls to its consumer helpline.
