A number of First Active mortgage customers were overcharged on their mortgage protection insurance policies as far back as 1997.

Affected customers will be refunded the amount they were overcharged, plus interest, over the next few months, First Active said yesterday.

The overcharging occurred when customers who redeemed their First Active mortgages were charged an extra monthly premium for the month in which they redeemed the loan.

The mistake, which was the result of a computer error, was discovered after First Active was taken over by the Ulster Bank Group at the beginning of 2004.

A spokeswoman for First Active said the group was still assessing the extent of the problem and the number of mortgage customers affected.

She said the bank had informed the Irish Financial Services Regulatory Authority of the error.

The policy on which the overcharging occurred was a Mortgage Payment Protector policy that was underwritten by different insurance companies but sold by First Active.

The lender paid the premium to the insurance company 12 months in advance and then deducted the premiums from customers on a monthly basis alongside their mortgage repayment.

Customers were charged the premium for the month in which they redeemed the mortgage and are now due a refund for all or part of that month, depending on the date on which the mortgage was cancelled.

The spokeswoman said the maximum value of the refunds due was one twelfth of an annual premium, a sum amounting to about €30 on an average policy.

She said there had been no profit-taking by the bank and the amount of the overcharging had been sitting in a First Active balance account.