The Irish Financial Regulator says in accordance with its statutory Consumer Protection Code, AIB has reported an error that occurred in the classification of the accounts of some customers. AIB estimate that 40,000 accounts may require refund with an estimated refund value of €4m plus compensatory interest. The average refund is expected to be €100. However until the full rectification process is complete, it is not possible to quantify the total number of accounts and potential refunds.
AIB said the account classification process defines accounts as personal or business and determines the fees/charges and interest package to be applied. An element of the account classification process has been found to be vulnerable in some cases, resulting in accounts being mistakenly entered into the wrong category. This means that some personal accounts may have been classified as business and some business accounts as personal. This incorrect classification may have arisen over a number of years and could result in incorrect fees and charges and/or interest being applied to customer accounts.
AIB informed the Financial Regulator of this when the issue was identified in November 2008. At the request of the Financial Regulator, independent assurance is being provided by KPMG and a process is underway to identify the accounts which might be impacted and to ensure that they are fully reimbursed where appropriate by 31 March 2011.
The details of the charging error are as follows according to the Regulator:
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Incorrect classification of some accounts that determine the fees/charges and interest to be paid on the account that differ for both personal and business customers’ accounts.
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Those accounts that were incorrectly classified resulted in some personal accounts being classified as business customers and some business accounts being classified as personal accounts, resulting in incorrect fees/charges and interest being applied to customer accounts in certain cases.
AIB estimates that 40,000 accounts may require refund with an estimated refund value of €4m plus compensatory interest. The average refund is expected to be €100. However until the full rectification process is complete, it is not possible to quantify the total number of accounts and potential refunds.
The Head of Financial Regulation, Matthew Elderfield, announced today that the Financial Regulator is conducting a review of its approach to how overcharging is dealt with under the Consumer Protection Code. Matthew Elderfield said: "It is clear from recent cases that change is needed in how firms handle charging and pricing issues. The Financial Regulator is concerned that financial institutions continue to experience control failures that result in customers being overcharged.
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. 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.
The Financial Regulator is therefore conducting a review to strengthen its approach concerning the timeliness of resolving overcharging in firms and the grounds for enforcement actions against such failures. When appointed, the new Assistant Director General for Enforcement will also be conducting a fundamental review of the Financial Regulator’s enforcement strategy, which will include the approach in this area."
