AIB failed to inform the financial regulator as required by law as to the extent of certain foreign-exchange charges it levied on its customers, a report by the Irish Financial Services Regulatory Authority (IFSRA) has found.
The progress report, the first of three due from IFSRA on recent scandals at the bank, concerns the extent of the overcharging of certain foreign exchange customers, how many customers were affected and how the bank plans to return the cash.
The report says in addition to charging certain customers in excess of the notified exchange rate, it also identified "24 other cases where AIB had charges in excess of the rate agreed with the customer". As a result of this overcharging, a total of €34.2 million, including interest, is to be refunded to customers.
Mr Liam O'Reilly, chief executive of IFSRA, said the investigation had found AIB failed customers in a number of areas.
"In some instances, it charged customers more than it was entitled to. It also failed to notify the regulator, as required by law, in relation to certain regulated charges which it levied on its customers," he said.
"While we are continuing our investigations into these and other matters, it is very important that the issues relating to customers are being dealt with as a priority."
He said investigations were also ongoing into certain tax and deal allocation issues which arose in the late 1980s to mid 1990s.
Today's report also states that "internal controls in AIB in relati
Mr Liam O'Reilly, chief executive of IFSRA
on to compliance with Section 149 of the Consumer Credit Act require strengthening".
This Act requires that "each credit institution shall, within three months, notify the Director [of Consumer Affairs] of all charges imposed by it in relation to the provision of any service to a customer or to a group of customers."
The amount of money owed to some three million overcharged customers on certain non-cash foreign exchange transactions over €600 is estimated as €25.6 million in the report.
The investigation into foreign exchange charges at the bank said the €34.2 million encompasses the €25.6 million foreign exchange overcharging, €0.5m in other notification breaches and €8.1 million in relation to the 24 other charging cases identified during the investigation.
The majority of the €8.1 million related to eight significant items in areas such as student loans and variable rate mortgages to which promised discounts were not applied, overdraft facilities amendments and early settlement of finance and leasing customer leases.
Under current law AIB is not legally obliged to repay customers amounts it charged over and above the notified rate because the customers paid the rate advertised or agreed. However, the bank has already lodged €25 million with the Central Bank to cover repayments that may be required.
In a statement released following the publication of the IFSRA report, AIB confirmed that, where it was discovered that errors were made and customers overcharged, the bank would make appropriate restitution.
Mr Dermot Gleeson, chairman of AIB, said while there was no legal obligation to make repayments for foreign exchange charges it was necessary to protect the bank's reputation.
"When we do make mistakes, we do our level best to be candid about them, and to put them right. That is the most important message I would like to convey today."
However, the report also notes that while the levies charged by AIB were in some instances higher than the charges notified to the regulator, the charges "appear to have been in line with those charged by its competitors".
The report also notes that the failure to notify to the regulator as to what it was charging certain foreign exchange customers "appears to date from September 1995".
Electronic records will be used to identify overcharged AIB foreign exchange customers since November 1997. The report says that approximately 50 per cent of customers (accounting for 70 per cent of the sum overcharged) can be identified this way.
The remainder will have to be identified manually and AIB is encouraging customers to come forward and seek recompense if they believe they have been affected by overcharging.
AIB estimates that 10 per cent of customers (by value) will be difficult to identify and this money will be returned to the bank once 90 per cent in value of what was overcharged has been repaid to customers or after two years have elapsed.
IFSRA said it would monitor the identification and payment to foreign exchange customers to ensure that the maximum number are identified and reimbursed.
IFSRA states that it became aware of the overcharging following an anonymous phone call alleging overcharging by AIB on April 20th, 2004. The bank confirmed on May 6th that an error had been made and apologised to the regulator.
The IFSRA report is based on an investigation carried out by Deloitte & Touche, and is supervised by the former comptroller and auditor general Mr Lauri McDonnell. The investigation was established by the bank in May.
- AIB has established a customer helpline (1800 787 564) for customers with queries.
